To go from optical back to electrical just seemed wrong from a tech evolution standpoint. Not hearing a lot of call to rip out multimode fiber in backbone networks and replace it with a shinier coax. But HDMI seems to be meeting the need, and there is always the aftermarket for fully annealed 99.999% oxygen-free HDMI cables to consider.
For legacy equipment you can get a box that takes hdmi in and spits out spdif.
Yes, that's what I wrote was dropped in G4.
(The Google equivalent dongle is also good.)
You certainly shouldn't be able to hear DAC differences through earbuds, but they shouldn't have issues being driven either unless they're really exotic. If I had to guess, I'd say the plug wasn't seated properly, or there was an issue with the in-line microphone.
This is just great for headphone nerds, audiophiles.