The only advantage that digital has over analog that I know of is transmission immunity to noise. A digital signal still has to be converted to analog to power the driver in a speaker. There are systems that keep the music signal in a digital format until the last possible point by placing DACs in the speakers.
I don't understand what is hard to believe about an analog component not supporting digital inputs.
The idea that the DAC and analog section in a DVD player being better than that in an AV receiver is based on meeting a price point and complexity. Let's pick $500. The typical 5.1 AV receiver has to have 6 DACs, 6 analog sections, 5 amplifiers, 6 channel volume control, AC3 decoding, DTS decoding, analog routing, video routing, speaker delay and level setup, etc. Compare that to the 2-channel analog output from a DVD player. It's quite reasonable to expect that fewer compromises will be made to meet the price point in the DVD player than the AV receiver.
Maybe this makes a little sense.