I always thought that stereo passed digitally was still interpreted directly as stereo and could be processed in some DSP if desired. I never considered that the digital input would derive stereo from another DSP mode. Part of me thinks that it is indifferent either way; If the input were 2 channel analog, it could directly be amplified, whereas any digital (optical or coax) input must receive some sort of Digital Signal Processing before being amplified. Maybe its a terminology discrepancy.

But, in my situation, I have both the coax and the analog 2 channel output from my DVD player going to the Outlaw. I run the Coax to the DVD input and the analog to the CD input. I did this so I was able to chose which signal went to the TV. That way, if I am bored with the sounds from a video game or whatnot I can switch the 1050 to 'CD' which does not switch video, but gives me audio from my DVD player.

I guess its common sense, but my point mainly was that there is significant difference in sound when using the analog 2 channel and the digital coax in stereo mode. So, DSP or not, the digital signal (as expected) is more clear in my particular set-up than the analog counterpart.

S.