From my understanding, software digital volume control works just as well as a hardware controls. As long as it uses the maximum (usually 24 bit) resolution your DAC is capable of.
Yes, for 16 bit files, which would give you 8 bits or 48dB of possible attenuation. If you're playing high-res 24-bit files you will be chopping off bits with any amount of attenuation using a 24-bit volume control and 24-bit DAC. If you have a software player with 32-bit volume control and a 32-bit DAC you will have the 8-bit/48dB volume attention for 24-bit files with no loss.
That being said, even when I play 16-bit files into my 24-bit DAC, I still hear reduced dynamics playing at low volumes when using using the iTunes 24-bit software volume control, even though technically I shouldn't.
Steve