I'm a total newbie when it comes to LCD displays, however I was in a computer shop today and the guy there said that digital output is much better than analogue (VGA).
To demonstrate he changed from one to the other and whilst I didn't notice a lot of difference myself, I did notice that text in particular was a lot better with digital output. It was noticably sharper.
Maybe Sony LCDs are so good it makes no difference but in cheaper makes it seems to (to my eyes anyway)
cheers