In case anyone's curious about how the PWD MKII's coax and USB outputs compare, I did some A/Bing using my Cardas Clear USB cable and my Halide Design Bridge USB-to-SPDIF converter. I only listened to a few tracks in J. River off an external hard drive, all of which were 24/96 or standard definition. LCD-3s were the headphones.
The differences are definitely subtle, but it seemed to me that the USB output was better. The same tracks on coax felt tinnier and less tonally real, with a compressed dynamic range. USB felt more robust, textured, and lively. Coax seemed a bit hazier and less precise, both in terms of resolution and the 3-dimensionality of the space in which instruments appear and resonate. More of the LCD-3's headspace seemed to fill up on USB. Vocals have more presence and body to them on USB, while seeming slightly veiled and timid on coax.
In addition, in coax mode, the PWD is slower to buffer and process a change to a new song or a different bitrate/sample rate; on USB, my computer and the PWD handle the transitions almost seamlessly.
Of course, it's possible that the Halide Bridge isn't the best USB-coax converter, and/or it doesn't fully utilize the PWD's coax capabilities. The Cardas cable might also be part of the advantage, to the extent digital cables can sound significantly different. But the results were a bit surprising to me, since it's often said on Head-fi that USB audio still has a long way to go to measure up to the level of formats designed with audio in mind, like SPDIF. In these particular setups, USB was definitely not inferior to coax, and I ended up preferring USB on every test track (though not always by a large margin).