Update: Think I'm going to RMA, details below.
Found this article below on AVS forums and in my case I completely agree with it. (Quoted Below)
Basically my AX-497 is a hell of a lot better than the 371 (in terms for powering speakers)
and now im thinking I should I just spent all my money on a sound card with a great DAC.
When cranking up the volume on the 371 I the distortoin and noise is very audable.
Also, although the sound is very clear, it feels very undynamic compared to even the sound of my of M50's plugged into my iphone.
IE... THe DAC in my iphone sounds better than the dac on my reciever.
Found the below statement on AVS forums that I found realated highly to my case.
"I completely disagree about optical out.
The whole point of getting a quality sound card, like an HT Omega Claro, is because they have such phenomenal DAC's.
You want to output ANALOG from it, otherwise what's the point?
Outputting DIGITAL from it, would simply pass the signal along for the receiver's DAC which is most likely going to be inferior to a quality sound card's DAC. Once the digital -> analog conversion is done, you want to leave it pure and only allow the receiver to amplify the analog sound and no more.
Chances are, unless you have a $750+ Marantz receiver, it will not match the DAC of even a $100 Creative X-Fi card .. and entry level receivers today have very poor DAC's because so much money goes into stupid **** like 3d video switching.
So 67jason.. what kind of receiever do you have? It all depends on what piece of equipment has the better DAC. A receiver will have a better DAC than onboard motherboard sound, so outputting digital for you would be the better option unless you added a nice sound card.. in which you would then benefit from analog again."
Edited by peck1234 - 4/28/12 at 11:47pm