How come DAC and Cable dont mix?

Dishnetwork outputs PCM via toslink. I just upgraded to the Dish 622 HD box and it gives me a choice of Dolby feeds or exclusive PCM. Yes, my better DAC is an improvement in sound quality.

Your D/AC may have too low a kHz rating to decode the signal.

Too low a kHz rating? You mean sample rate? Redbook CD, which most DACs will conform to will do 16 bits at 44.1 kHz. While some DACs are built for higher sample rates and word sizes, the incompatibility with video-based signals is going to be due to surround sound incompatibility, not sample rate. In other words, a lot of video devices are trying to supply, as Reubent observed, a DTS or Dolby digital stream--that is different from a standard PCM S/PDIF signal used for CDs and the like. I can't imagine a digital source that works at higher sample rates that won't downconvert to standard 16/44.1 PCM.