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I had a rsp1068 and the dac in that was fairly good if a little on the bright side (older dac limited to 16/44).
If the 1069 is the same you plug the optical cable into Optical #1 on the top left of the rear panel (and in the rear of the Tuefel) and then set up one of the inputs in the setup menu to be assigned with the optical #1 input plus then set select 2ch stereo sound (may be even with direct stereo if it has it). The 1069 has a 24/192 capable burr brown dac so should be pretty good.
Alternatively, plug the analogue output of the tuefel into the cd or tuner or possibly tape inputs and then again set up another input channel to be linked to that and again direct stereo.
As @dollag says, you can connect both and switch between the two inputs on the RSP and the tuefel and see which you prefer.
I used my 1068 as a preamp for stereo active monitors using the optical input from a Chromcast Audio and it was pretty good, very clean and crisp.
Just for completeness the DAC (Digital to Analogue Converter) takes the digital signal from wifi, Ethernet, Bluetooth containing digital music data and converts it into an analogue signal that an amplifier can then amplify to a level that can drive the movement of the speakers. The DAC in your case is both in the Tuefel or the Rotel (embedded inside the machines. So you have the choice of:
1) Wifi/data > Tuefel toslink optical digital out > Toslink optical in to Rotel > Rotel internal DAC > analogue L/R outputs > power amp > speakers
2) Wifi/data > Tuefel toslink internal DAC > Tuefel analogue RCA out > Rotel analogue CD/Tube/Tape input > analogue L/R outputs > power amp > speakers |
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