There are actually three scenarios possible for a typical surround receiver:

  1. Player connected via analog cables, "analog bypass" mode engaged. In this case, the DAC in the receiver does not come into play. Surround processing, bass management, and other DSP-related capabilities are also bypassed, although some receivers with an analog bypass mode will provide some form of bass management if speakers are set to "small."
  2. Player connected via analog cables, mode other than "analog bypass" engaged. This could be some form of surround processing such as Pro Logic II/IIx or DTS NEO:6, or it could just plain stereo playback. No matter which case, though, a surround receiver will typically take that analog stereo signal; convert it from analog to digital; feed it to the DSP chip for any desired surround processing; apply bass management; do any channel trim or speaker delay adjustments that are appropriate; and then use the receiver's DAC to convert the digital signal back to analog.
  3. Source component connected to the receiver with a digital cable. In this case, a DVD or CD player would be acting purely as an audio transport, moving digital audio bits from disc to receiver with no manipulation or conversion taking place. The receiver would then do anything necessary in the digital domain (decoding of Dolby Digital or DTS, additional surround processing, bass management, and so forth) before sending the final digital audio signal to the receiver's DAC for conversion to analog.

Does that help any?
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gonk
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