Airport Express firmware update (7.5.2) solves problems with optical out
Many people have complained about the fact that the Airport Express (n) has dropouts when the optical out is used with anything else than iTunes. I had this problem when playing Spotify through Airfoil to my CA DACMagic. I had emailed Rogue Amoeba (the makers of Airfoil) about this and they replied that there was a problem with the Airport Express (n-models) they couldn't do anything about.
I was very pleasently surprised when a couple of days ago there (finally) was a firmware update for my Airport Express.
First you have to update your Airport utility, then you can upgrade the AEX to version 7.5.2. I have tested the new version for a couple of days now with Airfoil (version 3.5.4) and I haven't had any dropouts with Spotify Premium of BBC iPlayer. The firmware update seems to solve all issues with the optical out of the AEX.
Happy listening through the holidays!