Firstly, it is difficult to give absolute advice here because your dvd player and receiver will affect the results. Secondly, your budget is also a factor. If you only want to spend say $40, then you cou could get a Monster Lightspeed 100 toslink or Apogee Coaxial, get decent results, but the difference between the two will probably not be very significant. However, if you're willing to spend around $100 or more, something the Harmonic Technology or Madrigal or Illuminations, etc., will probably give you better results than a toslink, depending on your transport and dac.
Coaxial or Optical
I am just getting my new HT system together. It includes an Onkyo 676 (old Adcom seperates for Stereo), Pioneer Elite DV-37, and NHT 2.3A's and matching center and surrounds. Should I use coaxial or optical to connect the DVD to the receiver? Does it make a difference? How much do I need to spend that will make a difference? I am using an 8 year old Sony 32" XBR. For video, I only have S video, can I connect to the receiver first and then to the TV? Does this degrade the signal. I should have it up tomorrow. Any input will be really appreciated.