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HDCD and K2HD questions

I just picked up a NAD C542 and it is able to play HDCDs. Currently it is hooked up to my Peachtree Audio Decco2 integrated amp via optical output to the Decco2's DAC. It's my understanding that in order to get the benefit of HDCD (from an HDCD disc of course), I would need to connect the C542 using the analog outs from the cd player, therefore using the C542's internal DAC. If I left it connected like it is, by bypassing the NAD's DAC, then I would not get the HDCD. Is this correct? I don't have any HDCDs to test at the moment, but was just wondering. Anyone know if any of the Peachtree DACs (specifically the Decco2) read HDCD?

Is the same true for K2HD CDs? Do they need a special DAC/player to play them? How do they compare to HDCDs?
 
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The SPDIF stream is usually taken straight from the CD data reading process. So it's the raw sample stream (after deinterleaving and error recovery).

So, yes, you will need an HDCD compatible external DAC.

K2HD? Had never heard of it until now. There isn't even a wiki entry for it... Same SPDIF issue as above.
 
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