The email I got back from Chord techs said I was right in that the “DSD” light will light up either playing native or DOP.
Linux (which the AuraliC uses) can only play DSD via DOP. This means that you will be capped at DSD 256. If you want native playback you need to use a Windows PC with the drivers.
In addition, DSD is really meaningless to Chord Qutest since it doesn’t really play DSD internally, it converts the DSD signal into PCM anyway before it turns it into music. So whether Roon turns it into PCM or it does it itself is the same thing.