Basically, yes. The Prisma is a decoder really, it just happens to be able to play spot effects - but only one per channel at a time. AHI does support software mixing, but it will be slower.
What you can't do on the Prisma is play a music in the background and then play spot effects on the same channel - so you're limited to using another sound source like Paula for spot effects (though you don't really need CD-quality blood splattering sounds or whatever

)
The Prisma is first and foremost a music card - the real advantage I reckon is that it allows us to use really good quality streams on a humble not-very-expanded Amiga, even a 68000-based one. I can't think of any other way to play heavily compressed lossless or high quality audio on a low-spec machine, and I think even a faster 68K Amiga would struggle normally with the high bitrate MP3/OGG/FLAC streams.
I can't say what the quality is like compared to a Prelude because I don't have one, but I do know it sounds good and the background noise level is notably less than my PC.
For what it's worth I do tend to notice when something doesn't sound good (I'm the sort of person who spends far too much on his vinyl

), and it does sound pretty fine to my ears.
I have high hopes (and I don't just mean Bruce Springsteen's latest album, but that may be played too) for FLACs played through the S/PDIF digital output .
