If you're using the digital coax, then the digital signal is going out from the Denon to the HK where it is being decoded. If you use the analog outputs from the Denon to the HK, then the Denon will do the decoding.
Thanks. After thinking about it for a minute, I realized that there's a simple way to use the Denon's DAC for music and still have Dolby 5.1 (etc.) sound for DVDs. I left the coax connection from the Denon to the HK intact and added an analog connection from the Denon the HK's CD IN. For music, I pop in a CD into the DVD player and select "CD" as the source.
As usual, this latest tech receiver doesn't have phono inputs (and I didn't have a phono preamp) but I got around that by connecting my turntable to my leftover Adcom GFP-565, which I then connected to the HK's TAPE IN. It's not as elegant as a dedicated phono preamp, but it was available and has a great phono section. The thing I'm not sure about is where the Adcom's volume should be set for optimum output. It's about ten o'clock now, where I leave it while using the receiver's remote volume control.
Snofun3 was correct- if you hook up both outputs it may default to the HK, unless there is a switch on the receiver.
However, if it SOUNDS better using digital output, use the digital. Analog outputs (rca left and right audio out) will use Denon DACs. The whole point of digital out is to bypass the denon dacs to allow external DAC.
Excellent! it's always worthwhile to A/B. I had a friend with a low-end system and toshiba dvd, and he was using the digital out on the toshiba. We switched to analog, and WHAT a difference. The sound was much less mechanical/ harsh sounding. I guess the receiver had the cheapest DAC as a selling feature.