There are about as many opinions on the sound quality of DSD vs. PCM as there are people who have them but the general consensus seems to favor DSD. I know from personal experience with my friend and mentor Gus Skinas, who has personally mastered perhaps a third of all SACDs', that properly implemented DSD is hands down more analog like than PCM.
Part of the problem in this ongoing saga of standard CD/PCM vs. SACD/DSD technology is that there are very few studios that record directly onto DSD - most going PCM and then later mastering from PCM to DSD should the need arise. I think most of us would feel comfortable with the statement that there's perhaps no advantage going from PCM to DSD and, in fact, most likely a loss.
The Sonoma DSD system as well as the Korg DSD recorder are probably the two main players in encoding DSD but, again, use of these two systems for original recordings is quite limited in the big world of recording studios. Great advocates of DSD recording, like Cookie Marenco of Blue Coast records, deserve a lot of kudos for furthering the art.
Another of the hopeful signs in favor of DSD's superior sound quality to PCM is the conversion of original analog master tapes to DSD on the Sonoma system. Gus Skinas is one of the experts in this field and I can tell you from personal experience listening to a DSD master of an analog tape is nothing short of breathtaking.
Despite the fact that Sony has chosen to abandon it's SACD format interest in DSD and SACD's continues to gain strength and steam and we feel that's a good thing.