Please help in answering a Noob questions.

Which port offers a better signal path an Audio USB cable or Toshlink Cable?

It’s would seem Peachtree neglected to mention that their USB connection is limited to 16 Bit 44.kHz. But the toslink is capable 96/192kHz? Does that even matter if signal is up sampled?

USB connection is limited to 16/44.1khz, are you sure? If so don't even bother getting it then, at the 1.6k price point you can get a Lavry DA11, Benchmark DAC1 or a Centrance DAC. As for connection wise, neither matters if jitter reduction is good on the DAC (which I think will be in the high end DAC range). But if I have to choose, I would pick USB (especially on Win7 computers) just a preference.

I’ve read that ITunes offers downloads of music files at 24/96kHz but I can’t seem to find that section on their site for this option.Do major record labels today even offer a wide selection of 24bit High-res either through download or disc?

Not really, most music is still recorded in CDs very few labels are recorded in 24/96.

I’ve check all the online guides for computer audio setup but still confused about windows 7 configuration and Itunes does anyone have guide they and send me too. I’ve already used guide by Benchmark, The Well-Tempered Computer wavelenght,sweetwater.com,

I suggest that windows 7 you use a alternative player, good ones are Jriver Media Center, Foobar, Media Monkey, Jplay(is that the name?). For Itunes you have to constantly set the sample rate via Quicktime if you are using it with files differing in bit depth.

If a DAC upsamples 16 Bit CD to 96 kHz is there any noticeable difference and audio file that’s already sampled at 96kHz? Will the DAC recognize the file doesn’t need up sampling?

Generally sampling is not limited to the DAC but more of the player, you can set a player(not Itunes) to play the track in its native resolution and sampling rate.

Does ITunes still have an issue playing various sample rates? I read somewhere that it only locks onto the first item played and the only way to play next song would be to close the program and reopen it is that correct?

As I said earlier, Itunes follows the audio settings set on Quicktime, so if you have the settings in 16/44.1 and have a file in 24/96, I assume(not sure) that it will play in that resolution. Which is why I suggest changing players.

What the correct setting for sample rates in the default format tab in Windows 7 Sound tab.  If I’m listening to Redbook quality 16/44.1 kHz music sample do I set the rate on my DAC to match it or do I change it to higher setting 24/96kHz or 24/192kHz?

Correct settings will usually just be 24/96 IMO, assuming you buy another player(I have to mention Jriver again, such a fantastic player) you set your dac to match the source sampling rate ( on other players you have the option of setting playback to follow the source). As for bit depth you may get more out of your DAC by setting it to 24 bits instead of the usual 16 bits for more dynamic range. Audible mileage may vary, though presenting a higher word length(bit depth) does not add distortion while upping sample rate will do so.

So if say your file is a regular 16/44.1khz file, you your player should present it to the DAC as 24/44.1khz.

Usb allows 24/96 through asynchronous usb.

Your never get true 24bit anyway, equipment just isn't capable of 144db of dymanic range (signal to noise).