Once I have it set up this way, I can still run alsamixer and adjust the volume of the audio.
So, some questions:
1. If I am configured "bit perfect," shouldn't I not have volume controls from alsamixer.
2. If I am supposed to have volume control, what is the ideal volume setting to set it at for bit-perfect output?
As soon as your sound reaches a DAC, you lose all bit-perfectness, by definition! Because the "A" in "DAC" means "analog", and there are not bits in analog audio.
So your DAC has a volume control. That's fine. That's not a problem for bit-perfectness, because your audio path has lose bit-perfectness already before reaching the volume control.
The idea of bit-perfect playback is that you preserve bit-perfectness as long as possible in the chain, to avoid unnecessary quality degradations. Sooner or later, you'll have to convert to analog (your ears aren't digital, after all). The later, the better.
My own setup is a simple cheap USB-to-SPDIF (coax) adapter, which connects to my amplifier's SPDIF input (Yamaha RX-V3800). Everything is bit-perfect until inside the amplifier. That's good, because there are no analog cables (except for the speaker cables, of course).
Your DAC requires you to use an analog cable between the DAC and the amplifier. That's one more analog cable than my setup. Not a big deal, you probably won't hear a difference in audio quality, but it's one thing which might be interesting to consider when you want bit-perfect.