Howard, I have no doubt that digital can retain more detail and clarity in it's virgin state on the storage drive, or maybe on a lossless FLAC file. I think it's the final production and distribution where the detail gets lost, compressing several tracks to fit on a CD, or thousands of MP3 tracks stored on a iPod or similar MP3 player, something has to give. A bit like a JPG image file (File size vs Quality) I guess.
I also agree the equipment you play the music through can be a big factor in listening pleasure. Decent gear will undoubtedly sound better than lesser quality gear, but being digital it can only attempt to process what you feed it. Makes me wonder what the difference in file size is between the original, and the final CD or MP3 files but I should imagine it's quite large.
Regarding cassette tapes, did they ever produce digital cassette tapes and portable players, like the ones used on early digital video recorders.?