Analog then. Basically, the only real difference between RCA and AC97 is that stereo is 2 plugs for RCA and one for PC, hence why converters are easy to find.
Basically, for analog (following the AC97 standard), its 2 channel output per plug (8 channel audio = 4 plugs), and you have atypical analog quality dependent on the output device. You get the full "richness" of the audio, but tend to have more background noise.
For digital, you tend to lose the high/low end of the sound spectrum a bit (weather or not this is detectable without high end equipment is open to debate), but lose the background noise (Which I can't live with, frankly). Transmission beyond 2.0 is difficult due to size; SPDIF only allows 5.1 using compressed formats (Dolby/DTS), and only HDMI allows for full transmission of all current formats (5.1 and 7.1).
Either way, gettting a USB soundcard for this purpose is pointless, as you're basically accomplishing the same exact thing without boosting sound qualiy much (possibly even lowing it based on the one time I used a USB soundcard...). If you REALLY wanted to bump up quality a bit with native RCA connectors:
http/www.newegg.com/Product/Product.aspx?Item=N82E16829132010&Tpk=xonar%20stx
Although its overkill for most people.