Nigel, the data arriving at the Squeezebox is Digital, this needs to be converted to analogue electrical waveforms before it reaches the amplifier stage in the Amp.
You have (up to) 3 possible stages at which you can perform this Digital to Analogue Conversion, however you can only do it once:
1) The first point you can do it is in the Squeezebox itself, if you choose this option, you'd connect the analogue out from the Squeezebox directly to an analogue input on the Amp, no need for an external DAC, however most people don't consider the DAC in the Squeezbox to be all that great, so,
2) You can use an external DAC (such as the DACMagic etc), in which case you need a Digital cable from the Squeezebox to the DAC and then analogue cables from the DAC to the Amp (because the DAC has converted the Digital signal to and analogue signal, so there's nothing for a further digital connection to do) or,
3) You can use the DAC built into the integrated Cyrus amp's digital input, in which case, you still don't need an external DAC you just connect the Squeezbox's digital output to a digital input on the Cyrus.
You'd have to determine for yourself which of the 3 options sound the best, however if you've already got the Cyrus XPD then I'd have to believe the DAC in there is better than the one in the Squeezebox, so you might as well use a digital connection from the SB to the XPD, although you could connect both analogue and digital from the SB to the XPD and switch between the two inputs to see which you prefer.
Anyway, the point is once you've done the digital to analogue conversion, every connection from there has to be analogue, not digital.