Let me get this straight:

The Touch being used has been modified so that the usb input becomes a
digital output.

Perhaps modifying the Touch in this way is somehow adversely affecting
sound. Try using either the coax or optical digital outputs on  a stock,
i.e. not modified, Touch as the basis for comparison instead.

Just for the record, if bits were NOT bits then things like the internet
and this forum would not work. Digital is NOT analog and digital does
not suffer from the same problems which affect analog. Digital has its
own, completely different set of problems.


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