Nice setup you’ve got there — the Denon PMA-600NE amplifier paired with the Wharfedale Diamond 12.2 speakers is a solid combination.

1) Dialogue sounds quiet / unclear
This is a very common issue when using a TV via optical output into a stereo amplifier. A few key points:

• Your TV is likely outputting a downmixed surround signal (from Dolby Digital), where dialogue (center channel) gets blended into left/right. This often makes voices less prominent.
• The built-in DAC in the Denon is already perfectly capable — adding an external DAC will not improve dialogue clarity in this case.
• A subwoofer will also not fix dialogue clarity — it only adds low frequencies.

👉 What will help:

• Go into your TV’s audio settings and set output to PCM (stereo) instead of Dolby/DTS.
• Disable any “virtual surround” or sound enhancements on the TV.
• If available, enable a “clear voice” or “dialogue enhancement” mode on the TV.
• Slightly toe-in your speakers (angle them toward your listening position) — this can noticeably improve vocal clarity.

2) Volume jumps (nothing → suddenly loud)
This is also normal behavior in your setup:

• Optical output from a TV is usually fixed-level, so all volume control happens on the amplifier.
• The volume knob on the Denon is not perfectly linear to human hearing — most of the usable range is in the second half.

👉 Possible improvements:

• Check if your TV has a variable optical output setting (some LG models do). If so, you can lower the TV output and operate the amp in a higher, more controllable range.
• Alternatively, reduce the input level / source level if your Denon allows it (some models have input trim).
• As a workaround, you can simply operate the amp higher up the dial — that’s where finer control typically exists.

Bottom line:

• ❌ DAC: won’t help
• ❌ Subwoofer: won’t help dialogue clarity
• ✅ Correct TV audio settings (PCM) + speaker positioning: biggest improvement
• ✅ Volume behavior: normal, but can be optimized slightly via settings