Which DAC processes CD audio - receiver or DVD?

You need to keep both connections hooked up. That way the denon DAC will handle the music and the HK will give you the full effects of DVD if you have the full speaker setup for HT.

Thanks. After thinking about it for a minute, I realized that there's a simple way to use the Denon's DAC for music and still have Dolby 5.1 (etc.) sound for DVDs. I left the coax connection from the Denon to the HK intact and added an analog connection from the Denon the HK's CD IN. For music, I pop in a CD into the DVD player and select "CD" as the source.

As usual, this latest tech receiver doesn't have phono inputs (and I didn't have a phono preamp) but I got around that by connecting my turntable to my leftover Adcom GFP-565, which I then connected to the HK's TAPE IN. It's not as elegant as a dedicated phono preamp, but it was available and has a great phono section. The thing I'm not sure about is where the Adcom's volume should be set for optimum output. It's about ten o'clock now, where I leave it while using the receiver's remote volume control.

Snofun3 was correct- if you hook up both outputs it may default to the HK, unless there is a switch on the receiver.
However, if it SOUNDS better using digital output, use the digital. Analog outputs (rca left and right audio out) will use Denon DACs. The whole point of digital out is to bypass the denon dacs to allow external DAC.

About using the Adcom as a phono preamp you should be using a tape out on the Adcom to go into your HK's tape in. Don't use the pre out on the Adcom. The volume on the Adcom would be out of the path and just turned all the way down.

Soundsgreat -- Thanks! It works perfectly.

Hammy -- With both digital and analog connections made, I can A/B test the Denon and HK DACS by pushing a button on the remote. To me, the Denon DAC sounds a little better, but it's probably a jump ball.