There isn't a separate DAC, that I know of... I thought the audio was handled by the Sigma 8650-series chip along with the video, which would be the 333 MHz DSP within the 8655.
And HD, or High-Definition, has generally always referred to video, to differentiate it from SD, Standard definition... there isn't an audio "standard" for HI-Def, because it solely refers to the video resolution. Yes, Dolby Labs has decided to call their 7.1 digital Audio "TrueHD", but "HD Sound" is a marketing ploy, not a standard.
Having said that, it's not surprising that the Gen1 WDTV HD and a WDTV Live or Live Plus might have different audio specs, since they use different chips. The actual audio is (as you've found yourself) a little tricky to track down with simple searches, even over at Sigma themselves.
But then again, I've already blown my hearing out long ago, and it tops out around 13-14k, so I can't even hear a difference between a 320 .mp3 and a CD track... so I have rather low standards for audio quality nowadays. :smileyvery-happy: