1. I'm quite satisfied with the Oppo's digital audio output. It is certainly on par with the Yamaha DVD-S1500 that also resides in my equipment rack.

2. Since my HDTV is a direct-view tube, I can't speak to the differences between DVI and component with a DLP projector. Unless the projector's native resolution vertical happens to be 720, you are going to need some help from the projector's internal scalers no matter which you use. I did find that the Oppo's 1080i output with my Zenith HDTV was a clear improvement over the 480p from my Yamaha, but that's a significant number of separate variables being changed (different video players from different manufacturers, DVI instead of component, and different resolutions).