There are basically two considerations here.

1. Access to the lossless audio options.
2. DAC performance.

The Model 970's going to have better D/A conversion capabilities than the Panasonic, which argues in favor of digital connection. (In contrast, Butchgo's OPPO player has a better D/A section than either the 970 or the 990.) The 970 doesn't support HDMI, though, so the lossless audio offerings available with Blu-ray (TrueHD, DTS-HD master Audio, raw PCM) can only be used via an analog connection from player to processor, which argues in favor of analog connection. Of the two, I think analog connection probably wins out.

If you use the analog audio connection, you will probably want to experiment with either the total bypass or the analog bass management on the 970's 7.1 channel input.