As Jed pointed out, stereo bypass ignores the digital input and goes directly to the selected input's analog stereo input - so if there's no analog connection made, bypass gives you no signal at all. With some CD or DVD players, you can get better CD playback using the player's DAC, in which case stereo bypass is the way to go. When I had my Yamaha CDC-775 CD changer connected to the 950 (a changer that is similar to your Denon in price and performance), I preferred the digital output. When I used a Panasonic DVD-Audio player as my CD transport, I did the same, but when I switched recently to a Yamaha DVD-S1500 player I started using the analog bypass mode for CD's. The best bet is to toss in some analog cables, try both, and find the one you prefer - there's not really a "right" answer.
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