As for the I/O thing. This is how I understand it. There is one button and just one button. We've been referring to it as the "I/O button." Pushing the button toggles between two states. Let's call these States X & Y.
State X = Internal DAC and amp are in use. In other words, DAC accepts USB or coax input, which is then sent to and output from the headphone amplifier.
State Y= DAC and amp are disconnected from each other and now function as two separate units. The DAC accepts USB or coax input and outputs from it's RCA line outs on the back. The headphone amp will only receive any analog signal coming from it's own separate RCA line ins.