AC 3 hook up to DvD Analogue PCM or Bitstream

I have an older AC 3 ready reciever. I have the 2ch hooked up to the 2ch on the dvd and the 5.1 hooked up as well . My dvd gives me the option of PCM Bitstream or analogue. My question is which way should I listen to it if I want the best 2ch listening. Does my AC 3 reciever actualy have a dac in it? or is it all being converted to analogue before it leaves the player.
Thanks for your time
I am afraid your Yamaha doesn't have a digital input. Its AC3 was designed for Laser Disc.
It does not have a DAC in the general sense. It has a DAC and a AC3 decoder for converting AC3 signal into 5.1 analog signal. My guess is the DAC might be embedded inside the AC3 decoder and not be a general DAC for PCM. Besides AC3, Your Yamaha only support Dolby ProLogic from analog input. So every input other than Laser Disc must be analog.