No, the digital port outputs a purely digital video and audio signal. The DAC in the component cable Converts the digital video signal to analog component and is of high quality. Thats why gamecube component is better than the wii component. Sadly the cable does nothing with the digital audio (probably because of the expensive DAC inside and there wasnt enough demand maybe).
Because there is a proprietary DAC inside,made by macronix if memory serves correctly, on special orders of nintendo, 3rd partys just couldnt replicate the component cable (they had to reverse engineer the cable and come up with something of their own).
Surprisingly, the modding community is busy with a N64 HDMI board which needs to be soldered directly to the N64 for board and gives digital HDMI video and digital Audio. Some guy by the name of Marshall is working on it and he intends to make the board compatible with gamecube also. That means pixel-perfect HDMI video and high quality digital audio.
It takes a lot of work with all the different resolutions, ntsc/pal signals, refrsh rate, scandoubler for making it compatible with all games and HDMI, clocks, syncs etc., but the guy is apparently still working on it. There was actually a recent update stating that he would add digital audio, so not dead i believe. But it will be released when its 100% done, the guy has already done some other amazing proffesional work for the modding community.
Here is the topic of the creation of this board:
http://forums.benheck.com/viewtopic.php?f=58&t=43034
Sure is an interesting read.
And here is a site where you can subscribe to be noticed when it is released and some general information such as pictures etc. Looks extremely professional and cannot wait for it to be released myself:
http://retroactive.be/tech_n64_hdmi.php
If linking to these sites is somehow prohibited I'll remove the links, but thought some of you in this topic talking about the absurdly high prices of component cables (alltough for me it would be still worth it) might be interested in the conclusion of this project as well.