So how much power is the amp actually capable of. Is it for example only 25 watts max ?( a quarter) or does it not work that way.It doesn't work that way. The amp's output voltage (not power) is proportional to its input voltage. Per Ohm's Law and the definition of power:
Power = (Voltage squared)/Resistance.
Therefore the 100 watt specification (presumably into an 8 ohm resistive load) for a 2 volt input would become only (100/(4 squared)) = 100/16 = 6.25 watts for a 0.5 volt input.
So which on paper at least is the better option.I doubt that it's possible to determine the best combination of settings other than experimentally. Among many relevant variables is the dynamic range of the music that you tend to listen to. Well recorded classical symphonic music, for example, will often have an enormous difference between the average power that is required and the power that is required for brief peaks, while for most rock music that difference will be very small in comparison. On the other hand, you will most likely listen to rock music at a higher average volume than the average volume at which you would listen to symphonic music. And the information loss resulting from the digital attenuator will vary depending on the internal design of the player. So it's all hard to predict without actually trying the various settings.
That said, it appears that your player is specified as using 24 bit internal processing, and having "21 bit resolution." And its digital volume control provides 100 steps of 0.5 db each. Since the material being played is only 16 bits, that suggests that you might not get significant information loss until the volume control is turned down below the half-way point.
Regards,
-- Al