DAC fed by DirectTV optical out for music & dolby

I love DirecTV's music channels. I am not impressed with the sound quality however. I was thinking of sending the optical out of the RCA DirecTV to an outboard DAC, then RCA to my Rotel rcvr. I was thinking of the Musical Fidelity A3-24. However, I will then need a DAC wiht a digital out to feed the digital signal to the rcvr for dolby digital

1.) Anyone have experience with this that can give advice?
2.) Will the DAC pass Dolby Digital to the rcvr?
3.) Any other DAC's out there that would do the job?

Thanks for all the help.
1. Yes, I use an external DAX with my cable and DMX service. Really helps.

2. Depends on the DAC, of course. The Levinson 360S does.

3. Guess you have to look at DACs with DigOut.