Is it possible to use the digital output from the DVD drive in my PC therefore completely neglecting the need for a soundcard? Is there any reason not to do this and leaving my amp do all the decoding?
No, I don't think so. Even if it may be fine for PCM stereo use, raw AC3 is read across the IDE bus (not via the separate S/PDIF channel) and ultimately written through the PCI to your soundcard.
