If by DVD-Audio you mean DVD-A discs, then it cannot be output over digital connections that use s/pdif. It is not ac-3 (dolby digital) - it is PCM that is compressed using Meridian Lossless Packing. You must use the 5.1 analog outputs for that (or proprietary digital schemes like Denon Link). The player will uncompress the PCM data and do digital to analog conversion on it.
If you mean 'dvd audio' in a general sense - meaning audio stored on a DVD, either Dolby Digital, PCM, or DTS then where the conversion occurs depends on what type of connection to the receiver you use and the settings on the dvd player. If you use coax or optical digital connections and set the dvd player to output 'bitstream', then the bits will simply be transported to the receiver and the receiver will do the d/a. If you set the player to 'pcm' then you would use analog cables to connect to the receiver and the dvd player will do the d/a. It's best to use the digital connections because the receiver has other features that require a digital signal (dynamic range compression - aka 'midnight mode' for example) but some people prefer to let the dvd player do the d/a and use the analog connections if they *think* the player has the better dacs.
