...You are right to steer away from low budget for analog output, but I tend to stear away from analog output via HTPC altogether...
Yep, using an good external DAC is the best way to do things.
Grubi, do you have experience playing .ac3 files in MP? I'm playing around with it and i noticed that the BASS library, which my plugin is also based on, is actually not performing passthrough, but decodes them into 6 channels, and that in a totally wrong channel order. Now for the channelorder being wrong there's a fix available on un4seen.com, but routing that to s/pdif would result in only front-left and front-right being passed. Can you confirm that?
Sieds
I only use AC3 audio on DVD playback but not for music so far. What I can confirm is, that a DTS audio testfile sampled at 44.1 khz is properly passed through (otherwise you would only hear noise) to the external amp.
Supply me with a file and tell me what to test exactly and I will do it.
grubi.