Those really cheap $8 toslink to single-ended RCA convertors that uberwaltz is showing are basically really cheap garbage DACs. mrgreenfur can certainly try one to see if the audio is acceptable, but it is definitely not going to be anywhere as good as a separate DAC or even a new receiver with toslink/HDMI inputs. It's something you can try "for the heck of it". If sound is bad, you can always upgrade to something else.
The FiiO D3 may be better than the $8 solution, but you still can only put so much into a piece of equipment for a $20 retail.
Another thing. I know caphill like to present the idea of using an "all HDMI" receiver solution. Keep in minds that audio transported through HDMI will never be as good as audio transported through digital COAX or even toslink. It's definitely a convenience thing, but I would suggest getting a receiver that has a toslink input and find a really good glass fiber toslink cable (lifatec / Wire World / etc.).