Ron,
I just bumped into this forum and I'm glad I did. I've been having the same exact problems with the USB input, and I have the latest Mac Mini, with 8 Gb of RAM and latest OS 10.6. My C48 shows up as a USB 1 (12Mb/Sec) device and i hear the same random clicks/pops (all my music is stored in a USB 2 external drive, in AIFF format).
Hopefully the new firmware will fix that.
I wish I could help you - I did get to the point of no clicks or pops after purchasing a new Mac mini and adding 8 gb of ram - this was for about an hour of listening...I ended up returning the C48 after a lot of a/b testing vs the HRT dac going into my Denon 4311 analog in Pure Direct mode - unfortunately, there was no difference in the quality of the sound, so I could not justify keeping the C48. Same soundstage, same frequency exension, same attack and decay...
I ended up selecting a Prima Luna Dialogue 3 tube preamp, which, for me, is offering a world of improvement, especially in terms of detail, soundstage, bass, and smoothness - currently using the HRT dac to feed it analog.
Now I'm no McIintosh bashing - I don't own Mc gear, was itching to buy a stereo preamp, and was really thinking this would be the ideal entry for me...
I hope to try some other McIntosh gear in the future, perhaps amplification.
Ron, thanks for your help, but as a note, be aware that there are very few setting on the Mac to successfully avoid d/a/d conversion and pass bitstream - afaik, iTunes volume at full, eq off, sound check off, gapless playback off, and sample rate left at 44.1 in audio midi (presuming one is playing cd rips at 44.1) passes the bitstream.
There are no special USB settings - the c48 is not showing up as a high speed USB device, but to be fair, I noticed that the HRT dac is not either - but the HRT never had dropouts, even with my original 512k PowerPC Mac Mini.