Digital is the best. Always select the digital. It reads the data digitally off the cd and sends it out digitally through the flatcable at the back of the drive and through the MB to the soundcard where it is converted to Analog. Analog mode is read digitally off the CD, converted to analog by who knows how cheap of a converter(probably less that 20 cents worth of parts), sent to the sound card over 2 thin wires (subject to electrical noise inside the case) connected to the inputs of the anaglog output section of the soundcard directly. Usually some hiss is heard with the latter method.
And you won't need that "CD audio to soundcard cable" if you go digital mode.