I'll make a response, but I expect others to chime in as I don't have
the full story on the digital volume issue...

You don't mention your pre-amp. Do you have one?

If you want to run direct from your Squeezebox to your amp with no
preamp (as some have found to be quite satisfactory) then you'll be
using the analog outputs from the Squeezebox.  In that case, you would
want to get the mods done, as the mods are for the analog signal path.
(decision made for you)


Question for those who know... does the "preamp" volume limiter work on
the digital volume output as well?  

Most DAC's do not have volume controls, even more rare are ones whith
remote-controlled volume.  Most folks will agree that the best sound
comes from setting the digital volume output on the SB2 to fixed (or
keeping it at 40 on variable which appears to be equivalent). If you do
that, then your DAC must have a volume control, or your amp must have
volume controls. Neither of which are likely to be remote
controllable.

If you run an external dac with no volume control then you have to use
the digital volume control in the SB2, and that may not be an optimal
solution, as I don't know if it will get the volume low enough coming
out the back of the DAC to be run direct into the amp with the proper
sound quality (i.e. dynamic range). 

If you do have a preamp, you have your choice back.
-Dan


-- 
dwc
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