The jitter discussion is not about lost bits.
The way SPDIF works (or better: as it was originally supposed to work)
the source (here usually the Squeezebox) drives the clock for the DAC,
NOT the device which does the actual conversion. Since the DAC is
essentially a low-pass filter (OK, I'm exaggerating but that's at least
it's filter characteristic) and low-frequency modulation in the clock
signal can end up in the final audio signal.

Whether this is an effect that could actually be heard is debatable
because phase jitter is a HIGH FREQUENCY signal (if you look at it's
effect on filters), not a low frequency signal.

The discussion is moot anyway these days because most modern DACs
re-clock the signal anyway (that is: they buffer the input and use
their own internal clock) so whatever happens before the DACs buffer
will be 100% lost anyway so optimizing there is just a perfect way of
completely wasting your money.


-- 
pippin

---
see iPeng, the Squeezebox iPhone remote and 
*New: iPeng for iPad*, at penguinlovesmusic.com
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