In my opinion, in an A/B comparison, there's a huge difference between audio from an Ipod and a CD. I can tell the difference in sound from the next room on a random track. To me, the Ipod sound is bad enough that I won't listen to it, given the choice between the Ipod as a source through the big system and silence. This is generally the case with 128K encoding on the Ipod. I'll have to try the Apple lossless encoding and see what the difference is with that. If it's that great I may have to buy a 160 GByte Ipod and re-rip a large portion of my CD collection.
I don't hear a great difference between using the DACs in the 990 and those in the Denon player (bitstream out of either HD or Blu-Ray vs CD). I tend to use the Denon because of the relative speed of operation relative to the Toshiba or Sony players.
Bitstream output simply sends the raw data from the CD to the output of the player. It will be decoded and the D/A conversion done in your 970. This should be pretty good quality sound.
Of course, some CD's are poorly recorded/encoded. A lot of the modern stuff has the dynamic range compressed so it will sound good (loud) on playback through Ipod or FM/car audio systems. Look for something that was actually well recorded. Mannheim Steamroller or anything on GRP label is recommended. (many others out there)
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Outlaw 990/7500/LFM1+/2xLFM1 EX
Kef 107 with KUBE
Kef XQ2c center
Kef 3005 surrounds
Samsung HL-67a750
Sony BDP-S301 Blu-Ray
Toshiba HD-A2
Denon CD
Harmony 880
Comcast HD DVR with external drive
Nintendo Wii