JC, the mini-plug is indeed a combination analog and optical. You will need a TOSLINK cable with a mini-optical plug (or mini-optical adapter for a standard optical plub) on one end. You can link the iPad 2's iPod application directly to the airport express, and from there the TOSLINK cable will take the signal to your DAC.
The sound quality is quite good, incidentally, especially if your music files are in AAC or Apple Lossless formats.
The sound quality is quite good, incidentally, especially if your music files are in AAC or Apple Lossless formats.