If it means unless i'm using a external DAC to decode HD audio through the optical output, the sound quality will not improved when playing HD audio on RBed H120?
Assuming that your external DAC has some status indicators you should see that it is running 44.1kHz and 16bit. As Saratoga says it is downsampled by Rockbox before being given to the hardware, both the TOS and analogue (if I remember rightly that is all in one device on the H100), best use a good application on the PC to downconvert and recover some HDD space.
There are quite a lot of threads on the subject if you search.
Some folk have even tried fitting high quality DACs, I don't know if anyone has succeeded in modifying the code yet to take full advantage of the on-board (or retrofitted) hardware of various players.