You can do it that way. It works fine with my Big 7 Balance with that configuration, but I may be a contrarian here. I actually recommend most people use the bit perfect PCM versus upsampling/converting to DSD.
I've blind tested both and sound-wise they are virtually identical on everything I've played. I've also run server processor tests and the PCM bit perfect requires far less processing power. Depending on your server/PC setup, you might get skips or dropouts with the DSD conversion if you try to do anything else on your pc/server while playing jriver.
Thus, my "general" recommendation is to go with PCM for virtually identical performance with almost no risk of over-taxing your server.
The great thing is that you can do it either way and swap back and forth relatively easy, so there's really no reason not to try for yourself and pick whatever works best for you.