I recently bought a Pansonic 50" Plasma. It has an optical out I run to my 990.
I also have a digital coxial cable running from my direct TV box to the 990.
Now here is what is strange, when listening to audio via the coaxial cable from the direct tv box, everything sounds mudled, but when I switch to the Pany's optical cable everything sound much cleaner.
Is optical that much better ?

When you say the Panny has an Optical out are you saying you use the Panny to feed the audio stream to the 990? You should be able to run the video HDMI out on your Directv box right to the HDMI input to the TV and the Coaxial audio output of the Directv box to the 990 coaxial digital input (it is orange colored RCA connection and is not threaded). My Directv boxes do not have a coaxial audio output but they do have HDMI and Optical.

Configure the 990 so that the audio from the TV box is the default when the TV is the video and it should sound fabulous. You can also use the digital optical out on the TV box to feed the 990.

It's likely that you've got a setting issue on the DirecTV box or are using different processing modes. Make sure DirecTV is outputting Dolby Digital and not internally downmixing to stereo (which it might do poorly).

My Direct TV box has both optical and digital coaxial outputs. I switched out the coaxial for a optical and the problem is fixed.
Could be the cable I thought was a coaxial digital cable was instead a video cable ?The cable is colored in between a yellow and orange.( just an old cable I dug up )
I will need to purchase another optical or digital cable, my question is, should their be that much difference if any, in the quality of sound between the two. Having just recently purchased an optical cable from radio shack for $25 , I'd rather not have to go that route.

There's no reason that there should be such a pronounced difference between the cable types. It sounds like you either have a bad cable, a bad coaxial output on the box, or some really odd interference condition that's corrupting the data over coaxial. Of the three, I think one of the first two is most likely.

Either connection (assuming no faults with source or cable) should work just fine. If you need to get a new one of some sort, I'd look at a few online sources. For optical, I'd go with either Outlaw's PDO ($20 in 1.8-meter length), MonoPrice optical, or BlueJeans. For coaxial, I'd look at BlueJeans or one of the higher quality (not the cheapest) MonoPrice. I've used MonoPrice for some of the longer runs in my system (mostly sources like DVD recorder, VCR, and AppleTV) for stereo analog, component video, optical, and HDMI. I've used Blue Jeans or Outlaw for just about everything else, including a lot of Blue Jeans component video, some analog audio, and some coaxial digital audio. You'll get more quality for less money from any of these compared to Radio Shack or someplace like Best Buy.