The HP setting tells the NFB-11 to output audio thru the NFB-11's headphone jack and the (RCA) line-output would not send out any audio signal
The NFB-11's gain setting would have not effect anything connected to the NFB-11 (RCA) line-output.
You can use the NFB-11 as a DAC only, but the NFB-11 still needs to be turned on for the DAC function to work.
If you set the NFB-11's setting to Fixed, the (RCA) line-output will send out an audio signal at 100% volume, if you set the NFB-11 to Variable, the NFB-11's volume knob will control the volume level being set out (thru the line-output).
When the NFB-11 is set to Fixed or Variable, then NFB-11 will not output any audio signal thru the (NFB-11's) headphone jack.
As the Ly2 2 comes with it's own volume control, set the NFB-11 to Fixed, when you using the NFB-11 at as DAC, for the Lyr 2.