Maybe I should chip in at this point, having had similar experiences. The most important thing to know is that in its purist approach, the D18 seems to have ZERO jitter rejection. So the digital source and cable have to provide that, which is not as obvious as it seems. And I'm not talking about perceived "sound quality" changes, but about very obvious clicks or drop-outs during playback (keep an eye on the blue led on the front panel)
- I have an expensive Cambridge Audio dock, and was not able to get a clean signal out of it beyond 16/44.1. Seriously, even 16/48 (the iPod can "read" 24/48 files but only processes a 16-bit signal) had drop-outs, not on CA's own DACmagic (with some built-in jitter correction), or the M-DAC's adjustable one, but noticeable on the D18, whether through optical or coax. The Pure i-20 dock, at 1/3 the price: no problem with any files (same cable)!
- I just got an AK100 HD player. Using my current optical cable, I can stably pipe through 24/192 to my small, kinda cheap Fiio E17, no dropouts or anything. It must have some level of jitter correction. Because when using the same cable with the much more expensive D18, there are constant dropouts at that bandwidth, and with the longer cable of the same make absolutely no sound anymore. Up to 24/176.4 no problem though, not even a single dropout. So in this case the limitation is the optical cable, since shorter works better at maximum bandwidth, at least on the D18. Again, no problem at any bandwidth on the cheaper E17. (Can't use coax, of course. And tried using a TOSlink-Mini adapter with a glass cable, fuggedaboutit...)
So, in short, I'm not sure your D18 is defective as such, but it is SO frickin' picky about the source stream it's a real PITA... Though in my case, almost all my HD material is 24/96 (the supposed optical max. standard) which plays back fine on every combination of devices. I only keep a few tracks in the more oddball combinations mostly for testing as described above..