I haven’t seen where Apple has said that Atmos in Music is actually multi-channel. It may simply be Dolby’s 2 channel mix down, like an Atmos receiver would for a 2.1 channel home theater setup.Unfortunately iOS/iPadOS lacks any meaningful adjustments to audio output other than selecting what device to use. I tried in vain to hook my iPad up via HDMI to my AV Receiver for Atmos Apple Music only to find it constantly defaulting to stereo, it would play the Atmos file as I had it forced on but only send stereo output to the receiver as indicated by its signal info screen.
I assume for stereo iPadOS adjusts output on the fly, so if you play a 96/24 file it will adjust the DAC accordingly but I have no way of confirming this. However posts above show users with a more expensive DAC with quality indicators are noticing the DAC changing output according to the songs being played, so I assume it’s doing the same with our cheap DAC if it is reporting to the OS as capable of handling that quality level.
And I can also confirm that the sample rate indicator on my DAC changes when the Music app switches from a Lossless song to Hi-Res Lossless.