@spirantho
I doubt it is a full digital path for SPDIF, as the chip seems to provide only analog outputs. Unless you are doing something wicked with that built-in XilinX.
I suspected as much. Nonetheless, the audio path between the decoder and the S/PDIF is still much shorter and should held reduce the noise over an analogue output.
On the hardware side, you could offer something interesting with the 12 GPIO pins the DSP chip has. Maybe an expansion module that could provide a sort of Geekport or a simple series of relais for controlling fun stuff, or even a LCD module that could display some playback parameters.
There are possibilities.

There are certainly things that could be done with the GPIO ports, but the first goal is to make the board and make it work. Extra things like that could be added on to future versions and I'm sure Amigakit are always open to considering such suggestions.
@matt3k
FLAC works fine - it just might struggle on a vanilla 68000... as most people have 68030s at least, and anyone with enough storage space to hold FLACs will almost
definitely have at least a 68030 it shouldn't be a problem.
I don't think Z3 will be in the first versions, anyway - but it's not that necessary I don't think. Maybe for highly compressed FLACs, it'd help. We'll be concentrating on Z-II and clockport first, anyway.