With the analog outs on the Cambridge connected to the analog ins on the NAD, you are using the Cambridge's DAC.
To use the NAD DAC, connect either the optical out or coax out on the Cambridge to the NAD input. The coax connection should give you a better transfer with a decent digital coax cable. (Do not use standard analog RCA cables to connect the coax connections. A "digital coax" cable has a different design and different impedience values.) If you don't have a digital coax cable and still want to see how the NAD DAC sounds, then you can use a optical cable.
You may need to go into the setup menu of Cambridge and tell it to use the optical or coax output.
