I just did a recording last night and the optical out does passthrough any converters. I used tau-analyser and audiochecker to verify the wave file captured by the H120 and it is 99-100% positive it is a CDDA
I'm not that familiar w/ CDDA files, but I'm still pretty positive that the digi-out is not doing what you think it is doing... Is it possible that you're passing the H120 the compressed file and then the H120's onboard ADC is changing it's format to CDDA upon your request... But if that's the case, are you only feeding the H120 the lossy-compressed signal an then the H120 is accounting for the missing information when changing the format to CDDA...
Maybe I'm missing something here, but first let's make sure we're on the same page... The signal that you're feeding the R09 is analog(not digital, the R09 doesn't have any digital inputs) and for that signal to be output through digital, it has to have hit the converters (that's what the ADC does is converts the analog signal into digital)... So when you say that it passes-through the converters, that's not the case... It has to have gone through the converters for it to be in digital...
Now as for compressed formats like MP3s, maybe it does hit a second stage (a saving stage) where the data is actually compressed to MP3.. To be honest, I don't know the answer to that but it's my understanding that it in fact does the MP3 compression at the same stage that it digitizes the analog signal... I could very well be wrong about that, cause as I told you, I'm not a hundred percent how the MP3 compression takes place or at what stage... To be honest, I don't know alot about MP3s, other than when they first came out, I've actually tried to stay away from MP3s...
If it in fact does have a second compression stage, what type of bit-depth and frequency wave is the ADC first converting the signal to? I couldn't tell you... And why is it going through 2 stages? And why would the optical-out bypasses the second stage?
As for the file that you're left w/ in the end, I'm not sure what type of analasis that you've performed, but I don't question that you ended up w/ an alt format other than MP3, in fact, I'm sure you did, I'm just not sure what format you fed the H120 to get your final format...