Computer output to DAC, which route?

I have disbanded my main system because I am using my computer system more and more. I am going to purchase an outboard DAC for my computer, but I want to know something:
My computer comes equipped with COAX and TOSLINK outputs on the motherboard. Should I use one of those or use a DAC with a USB connection? WHat are the pluses and minuses of each way if any? I am using typical Altec Lansing speakers (good for what they are) but will probably move up to active Dynaudio monitors in the future. All music is sourced from itunes in either AAC or apple lossless formats.

Thanks in advance!
Milen007 - There is no difference in the actual data between WAV and AIF/AIFF hence there is no difference in sound qualty. They are both uncompressed formats.

AFF is big-endian and WAV is little-endian (although there are little-endian aiff's out there)
If you are using toslink/spdif out of the computer into a processor then you are using the DAC of the processor.

The signal to the processor is pure digital, the DAC of computer does not come into play.

With a good quality optical/coax cable there should be no loss.
Hey Audioengr.

So if you're using mac and itune. use the USB converter then add the dac..

quite hard concepts to swallow..


Use a firewire device. Firewire is the best connection protocol on the planet and their are lots of great DAC options available.

Weiss firewire DACs

Echo Audio firewire DACs

just to name a few. Excellent performance for the price from the ECHO firewire interfaces.
Grace Design m902b headphone amp and ASUS Xonar HDAV 1.3 soundcard. The HDAV 1.3 (several minor variants) is the only line licensed to decode and transmit the audio from Blu-ray at full resolution. You will need Arcsoft TotalMedia player to do this. The soundcard has an S/PDIF out and the amp has an S/PDIF (and an AES) input. The headphone amp also has USB input but USB is limited to 16 bit/48 kHz, which is just not good enough IMO. The 'b' in the headphone amp's model number is for balanced outputs to use with active speakers.