Im certaintly no expert, but Ive read in other places that the optical-jitter induced along the toslink connection was largely due to defective parts in some early av receivers. Its not inherent to the transmission medium, but due to the way the early recievers handled the data once it was inside the component. Ive heard most dependable sources say that optical is just as reliable as coax nowadays though. I think you have to look at each source in a case by case basis.
I run a optical out from my aureal card for dvd's and such, but I also use the coax on my hipix. Because I only have the one coax input, i switched my toshiba6200 dvd player from coax to toslink, I can't tell any difference!
The optical on the aureal is nice cause it lest me dub minidisc thur the toslink connection without any fuss. That card can alos be had for less than 25 bucks most places..
Hey Jeff, Remember me, you helped me with the denon reciever and the deftech speakers a while back.