Hi Fas42 - I want to respond to a couple of points you make: "distortion is distortion is distortion," and "A key indicator of digital working well is that there is no such thing as a bad recording, you can enjoy the "soul" of everything you have."
Am I correct in guessing that you listen to primarily, perhaps almost exclusively, electronically produced music? This would be the only context in which I personally can conceive of anyone making the two above statements. Certainly digital can come close to analog in that arena. But if we are talking about recording the human voice, or other acoustic instruments, such as a full symphony orchestra, then sadly, there are indeed very very bad digital recordings; in fact, the vast majority. To give just one, but to me the most damning example, digital processing simply removes too much timbral information, something that designers have always acknowledged and have never been able to fix, despite the great advances digital has indeed made. This is what most people mean when they talk about missing the "soul" in digital recordings.
And I would vehemently disagree with the first of those quotes as well. It has always baffled me when some audiophiles make this statement. Analog recording has much more distortion in it than digital, you are certainly correct there. However, the distortions inherent in the digital recording medium take place at higher, and therefore MUCH more musically objectionable frequencies. I am no electrical engineer, and others have explained the reasons behind this much better than I; I am sure this thread has multiple examples. I am, however, a professional orchestral musician, and I can tell you that I have never heard a digital recording of an orchestra, as good as many of them are, that sounds remotely as close to real as even an average analog recording. Besides the timbral issues I mentioned earlier, there is also the relative lack of ambient information from the original recording space - almost all digital recordings are multi-miked and then remixed so that any sense of the music happening in a real space, so important for most classical music, is gone. Even worse, the worst digital recording engineers will add to the mix a very fake sounding reverb in order to try to get that concert hall sound back again. Yes, analog has more surface noise - but this type of distortion is not embedded in the music itself, and can be listened through. Many of the ways digital processing distorts musical realities cannot be listened through, as they are embedded in the recording itself. Digital has indeed come a very long way, but in mine and many other musician's opinions, a few of it's flaws can never quite be overcome.
Please understand that I am in no way implying that digital is unlistenable or anything of the sort. There are many great performances that were only recorded digitally, and I am certainly not going to pass them up just because they were digitally recorded. I merely maintain that analog is a superior recording medium, if musical realism is the goal.