#1 - Don't know how cheap the op amps are, but the SCD-1 is not digitally balanced so the balanced outs are not intrinsicly superior to the single ended outputs. Also, the balanced outs use the Japanese standard for pin connections (hot and cold are on opposite pins from the US standard), so you will invert absolute polarity when connecting to a US standard balanced input. You can fix this by making up a special balanced cable that swaps the hot and cold pins internally.
#2 - The DSD process uses lots of noise shaping that generates much ultrasonic hash above 50 khz or so (I'm doing this from memory, so may be off a bit on numbers). The default position of the switch engages a filter that rolls off the output above 40 khz or so. Removing this filter (by changing the switch position) seems to open up the sound a bit. I guess there is some small risk to your tweeters.
BTW, I don't think that the XA777ES has this switch - I wonder if it has a non defeatable filter.
#2 - The DSD process uses lots of noise shaping that generates much ultrasonic hash above 50 khz or so (I'm doing this from memory, so may be off a bit on numbers). The default position of the switch engages a filter that rolls off the output above 40 khz or so. Removing this filter (by changing the switch position) seems to open up the sound a bit. I guess there is some small risk to your tweeters.
BTW, I don't think that the XA777ES has this switch - I wonder if it has a non defeatable filter.