I spend a little more time investigating and it turns out that there is another even more intriguing option an that is native playback of the DSD stream via the ASIO interface.
I did not know this but the version 2.1 of the ASIO SDK does include support for playback of DSD streams.
There are a few solutions out there that does seem to support DSD playback via an ASIO 2.1 driver over USB. One comes from Switzerland
http://www.rigisystems.net/index.php/usbpalen.html and supports multichannel PCM as well as DSD.
The next piece in the puzzle is HQplayer
http://www.signalyst.com/consumer.html which in addition to providing DSD-to-PCM conversion offers native playback of DSD stream to ASIO 2.1 devices.
Sounds like there is some movement for DSD support on PCs.
Is this something we might expect to see in Media Center?
Cheers
Thomas