Tweaking My Setup

Greetings,
Currently running the following PC Audio setup:

Windows XP/iTunes (Apple Lossless)/Monster Cable Coaxial/Cambridge Audio DacMagic/Generic RCA-RCA Cable/Nait 5i-2 integrated amp.

(1) Preferrable to use coaxial or optical input w/ the DacMagic, rather than the USB?
(2) Any sonic advantage between coaxial and optical?
(3) If I continue to use coaxial or optical, should I disable Kmixer? If so, I could use some clear instructions.

Thanks in advance.