Would I be better off going from HDMI to spdif/toslink or USB to spdif or toslink? I've seen reference the idea that either spdif or toslink have limitations.
That is threading into the esoteric audiophile domain.
Personally, in a general sense, for stereo audio I would prefer 1. Coaxial 2. HDMI 3. Optical
But unless you are (aiming to be) a hardcore audiophile, I wouldn't worry about it for a second.
I'm not well-versed in surround, but I am guessing hdmi would be best for that, coaxial second.
Formats, compatibility and technical implementations and restrictions are more important factors that will decide if you will even hear sound or not. Or if you will get (all different formats of) surround sound.
This also depends on the audio formats and sources of course.
I won't be able to help much more with this. But it shouldn't be hard to find a plethora of information, reviews, and other people's experiences on the web.
On a side note, the way this thread has developped makes it more suitable for the 'Beyond MusicBee' forum board.
But considering your interest in surround, you'll probably find better information and support on dedicated AV forums.