If I need to convert from a digital input to an analog output, is it better to convert to analog early and use converters to get to the needed format or stay digital as long as possible?
Where are the quality losses?
Yes, any analog transition or transmission has quality loss. How noticeable that loss is depends on a variety of factors including the quality of the DAC (digital to analog converter), the quality of connections, the quality of cables, the quality of any amplifiers, etc.
That said, it isn't likely to practically matter particularly much. All digital audio MUST convert back to analog at some point as there is no such thing as digital speakers. At some point there will be a DAC in the signal flow, placing it earlier on may allow you to use a higher quality DAC and/or amplifier than would be included in say a speaker with digital inputs, but you then have to worry about the transmission and connection losses.
In general, the later you can go to analog, the better, but it isn't worth sacrificing quality gains or specialized processing you can get by going analog earlier. I would, however, strongly recommend against going from digital to analog and then back to digital if you can avoid it. That involves far more signal level changes which are going to likely be the most destructive part of the signal flow.