I have used both with the DAC1 and I can tell you that toslink, at least with the DAC1, sounds excellent. In a test, I used a basic toslink ($35) fed from a $250 Sony cd player to the DAC1, and compared it with a $250 highly regarded digital cable (Kimber Illuminations D60) fed from a $2,500 Proceed transport to the DAC1. I used the same cd (one of which I burned from the other) in each player and togled back and forth on the DAC1 between the two while playing them together. The sound was remarkably close and I would attribute the difference more to the transport than to the digital cable type. I continue to use both. While disparaged, especially since it limits bandwith at the extremes, I think Toslink is no slouch, at least connected to the DAC1 which may minimize differences. (Incidently the rest of the system in the test was highly revealing -- DAC1 direct to Pass Labs x150.5 amp (no preamp)
via Nordost Frey, to Magnepan 3.6's via Nordost Frey. Various power cables, conditioners, and tweaks used.