There's not much to the digital audio circuit. Two chips, a crystal, a TOSlink connector and a power regulator are all you need. This could all be shoved inside the GC, and a digital-out jack installed for the ultimate GameCube audio.
I have completed this mod and it works great! Here are some pictures. Now i am really ready for a good beer:)
Datasheet for the TC9231N can be found here - TC9231N
TC9231N Pin functions and circuit connections: Coming soon!