AC 3 hook up to DvD Analogue PCM or Bitstream


I have an older AC 3 ready reciever. I have the 2ch hooked up to the 2ch on the dvd and the 5.1 hooked up as well . My dvd gives me the option of PCM Bitstream or analogue. My question is which way should I listen to it if I want the best 2ch listening. Does my AC 3 reciever actualy have a dac in it? or is it all being converted to analogue before it leaves the player.
Thanks for your time
ghost_rider
My reciever has no digital imput labed only RCA to CD DVD Tape ect. Would this then mean that I should select analogue for all playing. When I watch a movie it is through the analogue setting.
Does it have any optical input? Sometimes they are labled Toslink and may have a black plug covering it.

BTW, what receiver do you have?
It is a Yamaha RXV 695 and it was the first from Yamaha to have AC 3 ready. It was bought in about 97 It has no tosh link. When I have played around with it, it seems that through analogue it is quieter by about 8db.
Thanks
I am afraid your Yamaha doesn't have a digital input. Its AC3 was designed for Laser Disc.