Like you, I've heard a number of theories both ways. Coax seems to be recommended in many cases as a better interface because the signal is passed along directly rather than being converted to an optical format, although optical offers the advantage of not being affected by electrical noise caused by (for example) close proximity to power cables. There are some others around here who may be able to offer a more specific answer.

It's been a while since I had a regularly used source component with a coax digital output; if I were going to pick one up, I'd probably go with either the Outlaw PSC or a digital audio cable from Blue Jeans Cables. Optical cables are a bit easier. In my experience, the brand of optical cable is not really an issue from a sound standpoint. After using Monster, BetterCables, and Outlaw optical cables, I've standardized on Outlaw's PDO because they are more solidly made than most and as cheap as anything else I've seen ($20 for a 1.8 meter cable). BetterCable's opticals are at least as expensive as Monster, but my BetterCables optical has a loose connector on one end -- not real impressive for a cable that costs nearly four times as much for the same length as a PDO and three times as much for a shorter cable.

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