From the engineer who worked on it:
> I reimplemented the original PWM-based 11-bit audio @48kHz as 7-bit 2nd-order Sigma-Delta modulated at 781.25kHz. The effective noise floor with this scheme approximates that of CD-quality audio DACs.
from the forums https://www.raspberrypi.org/forums/viewtopic.php?f=29&t=1364...
You can connect the RPI to a dac/amp with HDMI input or a digital audio extractor. The best quality will be found by connecting to an HDMI to SPDIF extractor and then running that into a good quality DAC.
The nice thing about this solution is that you're not dependent on the horrible and CPU-sucking USB offered by the RPI.
[1] http://www.crazy-audio.com/2014/07/sound-quality-of-the-rasp...
I've since moved the music setup to also use HDMI (the DAC in the receiver is bound to be better anyway), but sheesh, be warned.
I've no idea if it's a priority interrupt firing too much, body diode current weirdness, or some thermal issue. And I'm certainly not going to keep teasing the fault to figure it out.