Airport Express: Optical out: Itunes 8 skips, 7 works, Airfoil still skips

For a few weeks now i've been streaming from itunes and airfoil to my AX connected by analogue to my amp...no problem there, everything worked fine. I then purchased a Cambridge Audio DACmagic and went the optical route to improve quality. I experience small jumps in the music...there doesn't seem to be any sequence; they're irregular. It sounds like a small skip on a CD and i can see the signal light flicker off on the DAC for a fraction of second. I can plug the powerbook directly in the DAC optically and there's no problem.

Now, following the advice on a few threads, i've downgraded from itunes 8 to 7. That's solved the problem when streaming from itunes, the optical out from the AX works fine... I'll wait until i'm sure apple have fixed the problem before going back to 8.

However, my current problem is that i regularly listen to last.fm and spotify etc through airfoil. This has the same problem as itunes 8......small skips every 30 seconds or so.

I know it's not the radio stream (works perfectly through analogue and optically direct from laptop)
I know it's not the DAC (work perfectly optically from laptop)
I know it's not the wireless network (works perfectly through the analogue out from AX)

Any advice ??????