Hmm so I've heard now that it should be 100%, and 80%. I wonder if there's any scientific evidence to back this up or if it's just conjecture. I think I'll ask this question in the sound science forum. I tried adjusting volume on fubar myself and with the amp and didn't notice a difference, but then again I didn't listen very critically.
Yes, digital volume controls throw away bits of resolution as you decrease from 100%. But they use dithering and mix some noise into the signal to minimize the distortion from the lst bits. The following links talk about what happens in digital attenuation as well as using dither to help this distortion.
Most software players, but not all, have dithered volume controls.