What Max said. When you go through the TOSlink (or Coax, same thing) to record digital audio from a PC (Mac, Arduino, whatever), the format is PCM, i.e. uncompressed Pulse Code Modulation. The internal PASC compressor of the recorder encodes it to PASC and records the PASC onto tape. So there’s no point in encoding the music in PASC before you do that; it has to be decoded to PCM while you do the transfer anyway.
If you want to record audio files from your PC to a DCC recorder and you don’t have a DCC-175 with PC-cable, you get the best quality by using as few conversions as possible. If you have a choice when you source(*) your audio files, start with the highest quality possible, e.g. WAV (uncompressed) or a lossless compression format (e.g. FLAC). Set your output to PCM stereo, using the same sample frequency as your file if possible. If your file has a higher sample frequency than 48 kHz, use either 44.1 or 48kHz, the best choice is the one that divides most evenly into the sample frequency of your file.
Connect your recorder to a digital output via Coax or Toslink (the bits on each of those two are formatted exactly the same so there’s no reason to choose one over the other). The play the audio file to that output at full volume. Sorry I don’t have a recommendation for good software (if anyone does, please chime in).
Most files with music are 16 bits. Those files will sound just fine if you record them to any DCC recorder. If your file has more bits (18 or 20 or 24 or whatever), an 18-bit recorder or 20-bit recorder will process the extra bits too if the SPDIF output of your PC supports them.
===Jac
(*) Source=grabbing files from audio CD or downloading them from the Internet. DRM-protected digital audio files can probably be recorded to DCC by playing them to a digital output device, including HDMI to DVI+SPDIF converters.