Does the quality of a digital signal matter?

I recently heard a demonstration where a CD player was played with and without being supported with three Nordost Sort Kones. The difference was audible to me, but did not blow me away.

I was discussing the Sort Kones with a friend of mine that is an electrical engineer and also a musical audio guy. It was his opinion that these items could certain make an improvement in an analogue signal, but shouldn't do anything for a digital signal. He said that as long as the component receiving the digital signal can recognize a 1 or 0 then the signal is successful. It's a pass/fail situation and doesn't rely on levels of quality.

An example that he gave me was that we think nothing of using a cheap CDRW drive to duplicate a CD with no worry about the quality being reduced. If the signal isn't read in full an error is reported so we know that the entire signal has been sent.

I believe he said that it's possible to show that a more expensive digital cable is better than another, but the end product doesn't change.

There was a test done with HDMI cables that tested cables of different prices. The only difference in picture quality was noted when a cable was defective and there was an obvious problem on the display.

I realize that the most use analogue signals, but for those of us that use a receiver for our D/A, does the CD players quality matter? Any thoughts?