DSD is a digital format ("Direct Stream Digital"), so I don't see why it has to convert to analog instantly. The only question I'd ask regarding DSD digital input is if there is a DSD-to-PCM conversion in the processor. Many players and HDMI v1.2+ receivers make such a conversion before their analog section because they lack DSD-capable DAC's. Doing DSD all the way to the DAC is the purest solution, but I've read interesting feedback from folks who have compared DSD to PCM in their systems and found that they sometimes prefer PCM to DSD (depending on the components used in the signal chain and who is listening).