Do you agree with ASR that the DAC is lousy?
It's usually helpful to link the forums or discussions you're asking about as not everyone might know what you're talking about. Is this the review you mean?
https://www.audiosciencereview.com/forum/index.php?threads/denon-avr-x3500h-avr-review.10053/If so, then those DAC measurements are pretty poor, in fact, among the worst measured on ASR. That said, a THD+N of 0.02% would be middle of the pack for an amp (which are generally noisier than DACs), it's just very poor for a DAC. Most modern DACs, even fairly cheap ones, have much better distortion specs.
But while the Denon DAC's distortion specs are not very good for a DAC, they may not be audible in any case. I haven't seen reputable listening tests showing that distortion in the hundredths of a percent is reliably audible, although I'll offer some caveats:
1) Distortion is additive at every stage, so that DAC distortion is being added to the amp distortion and the speaker distortion, etc. So while the DAC distortion may not be audible by itself, its contribution may push the total system noise up into more audible territory.
2) The ASR thread notes that the DAC had much higher distortion and was clipping at maximum output. That's poor design, and anyone using the Denon will want to make sure that they're keeping the DAC volume low enough to avoid that kind of issue which could produce much louder and more noticeable distortion. How loud is too loud? Great question, and anyone using the DAC will be wondering that too unless they measure the system themselves.
TL;DR-- The DAC is not a very well-designed DAC, but one might or might not notice the ways in which it's bad especially if you're listening at lower volumes. If I were OP, I would probably be looking for a different DAC for stereo listening at least, because there are many much nicer stereo DACs available for cheap. To put it in perspective, the $15 Apple plug in DAC that's intended to let people use older headphones with newer iPhones is a nicer DAC (THD of 0.001%) than the one in the Denon (THD of .02%):
https://www.audiosciencereview.com/forum/index.php?threads/review-apple-vs-google-usb-c-headphone-adapters.5541/