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I'll take a stab at answering a few of these questions:

2. Can the unit display any information on the monitor such as the volume level and other prompts?

This unit is fairly low end for denon and as such does not display
anything on screen. I don't have the receiver
yet, but from sparse reviews and the posted specs, it is not apparent
it will do that. I'd be very surprised if it
does.

4. How much better would it be to use the digital coax/optical audio connections than the standard line connections? I have the DVD recorder in the main path from the cable box to the receiver and it does not have passthrough digital audio.

I'll assume you're hooking up your dvd player using the regular
red/white RCA outputs. In this case, using either a Digital Coax
(looks like, and is, an RCA cable but orange plug) or a TOSLink
(optical) will result in much better sound. The reason being the dvd
player is downmixing to 2 channel audio and sending to your receiver.
If you were to use a digital input then the receiver would be decoding
the full 5.1 (ore more) channels and fully utilizing your equipment.

To test this plug a plain old RCA into the coax out of the DVD player
and connect it to a digital coax input on the receiver. The orange
plugs on the back. Then, wrestle with the unit to get it to use that
input for DVD and put in a good quality DVD. If you've been using 2
channel RCA and you move to real 5.1 - _you will be amazed_.

The only caveat here is if you have a DVD player with discreet 5.1
output. To do this you'd have to have 6 RCA cables running from the
DVD player (1 for each channel) going to your receiver. The only
benefit to this, IMO, would be if you had a really great DVD player and
you wanted to let the DVD player decode the audio. This is, in my
experience, very unlikely.

Good luck