analog is crud compared to coaxial, at least if your running a surround system. 1 cable vs 3+ (depending on if you have 5.1 6.1 7.1 etc), and an all digital signal. Also like steevo said, digital signals have very little degradation; its audio encoded into 'data', which is received by the amp or whatever your connecting it to, then its decoded and outputted, so the only loss quality is then your speaker end connectors, the wire, the connectors on your speakers, or the speakers themselves (audiophiles know). And to answer your question, yes, digital coaxial is better than analog. But because it travels through a physical wire, there is still SLIGHT signal degradation, which is why optic is considered the best. Only way an optical signal degrades is if the cable is broken (bent to far is the most common way to do this), or its ends are scratched. Analog on the other hand is exactly what your speakers are going to play. if you were to take the leads of a speaker, the red and black, and touch it to the inner and outer parts of an analog cable, you'll year sound, if you do that to a coax, you'll hear shit. Analog is very sensitive to signal degradation because the signal being put through it is exactly whats going to be put through the speakers, so any little bit of crosstalk, radio/power interference and whatever else is going to effect sound quality alot, and then that goes to a receiver/amp of sorts, and is pumped out to speakers, where again it can lose more quality over speaker connections/wire. So by replacing your analog cables with digital you'll easily be able to reduce a lot of signal degradation that can occur.
Hope that helps....
