Distortion from Airport Express setup?

I have a Mac desktop running Itunes with music encoded in Apple Lossless. It broadcasts to an Airport Express in the stereo room. I use the toslink out from this to a cheap DAC, from there to a pretty good stereo (Naim, Dunlavy). Slthough the sound quality is nowhere near that of a top shelf CD player it's pleasant enough for most purposes and I'm hoping that a better DAC will fix that down the line. The convenience is awesome. The problem -- transients are distorted, as if through a lightly applied guitar "fuzz box." It's most noticeable on loud piano passages and "average listeners" don't hear it unless I point it out usually, but from an audiophile standpoint it's really messing with the sound. I seem to get this also if I go with the Airport Express' analogue out (I haven't listened with headphones directly from the computer so I don't know if it's distorting there, but I can't imagine why it would). Has anyone else experienced this and could anyone suggest a solution?

Thanks,

KF