Is pre-amp/dac out's only difference ( compared to line-out) adjustabily , or the added circuit degrades sound quality ?
With each additional component that you add, you also add a certain variability of degradation of the sound , or at least alteration of it. That is why if your amplifier has a volume of its own, you will use the fixed line out on your DAC. Otherwise you are sending the audio signal through two volume devices instead of one.
for the maximum SQ, do I keep volume lowest possible or turn the volume pot up all the way?
If you are using a variable out as your only option you want to set the volume in the earliest device (source) to the maximum level .
On occasions that maximum level is too high for the next component down (amp), you would want to adjust the level as high as you can go before any sign of clipping occurs