1. PCM Pro: excellent resolution of small signals, very small signals do not disappear into the dithered noise floor.
Cons: Timing. Ear/brain can resolve 4uS, CD innately is at 22uS.
2. DSD Pro: Samples at 0.34 uS, albeit at not very good resolution, so has much better timing innately
Cons: resolution. Noise shaper noise is not the same as dithered noise, any signal below noise shaper noise floor is lost.
Now the timing issue can be resolved by the DAC interpolation filter, and with an infinite tap length filter, timing is completely reconstructed. So red-book is capable of very much better performance, if you improve the interpolation filter. But with DSD, the encoding means that low-level details are lost in the noise shaper noise floor, and they are lost forever. So DSD has a compression in depth and instrument separation, due to poor resolution, but does not innately have timing problems. Check out 2L website, and compare the DXD recording to the DSD64 or DSD128 - to my ears, the loss in transparency of DSD is not small.
Getting back to design of the DAC. Now I run my DAC's with a very simple single stage active analogue section, with only 2 caps and 2 resistors in the direct signal path - and I do this for transparency. But this means the digital RF noise in the 100k to 1M band must be very low, so the digital source must be filtered - and DSD is at -20dBFS at 100kHz. So I can't put raw DSD into the DAC, or it will sound very hard. So the DSD is filtered, which converts it to regular PCM.
If I were doing a DAC for only DSD would I do it this way? Yes, I think I would, as simple analogue is always the best.
Incidentally, the DSD filters on Hugo has been improved - they are much smoother than with Qute.