I use optical for long runs from my Sky box and DVD (which sit under the TV) to the surround processor (which sits in the hifi rack). I figure the (relatively) low quality signal from both of these won't be affected by the two extra conversions and if you shop around you can get long runs of optical for small amounts of money.
I would only ever use coax from my CD transport to my DAC because the extra two conversions are avoided and because the relatively short run (a half metre cable would do me) means I can spend more without spending, er, more, if you know what I mean.