Good morning
I've spent far too much of my life with graphic equalisers and have found the one on the B2 to be very good. I only use my B2 via optical output to my hifi and the eq works as I'd expect: graphic eqs can be analogue or digital, so that's not a surprise nor a problem.
I've found it's easy enough to get distortion on the B2 eq, as it is with all of them, but also easy to avoid it. One minor irritation with the design is that when you first enable the eq the volume drops, because the central position is not at "unity gain". I first moved all the sliders gradually to the right, keeping them in a flat line, until the volume was the same whether the eq is on or off. I found the unity gain position is just under two thirds of the way between the extreme left and right of the scale. Paul at Brennan estimated it at 62 on a 100 point scale. That should be the starting point for any adjustments (still taking care to avoid any overall volume boost) but, if you don't need them, leave the eq off.
I wasn't clear if part of your issue is the eq switching itself on: if it is, or if you're getting distortion after setting the volume level as above, there may be a problem which I'm sure the forum will try to help with.
Re the optical output being on all the time: when my B2 is off but the hifi is on, the display on the amp shows "optical 1: signal unlock". I take this to mean only that I have an optical input selected but the B2 is not actually being seen. However, when the B2 is on, even before any music is played, the message changes to "optical 1: PCM 44.1kHz". Thus the hifi now seems to be reading "something" from the B2, as it seems to know what sort of signal to expect? PCM is a generic term I think, covering various file types, but we know the B2 is capped at 44.1, whereas my hifi can deal with far higher resolution. Others here will know far more about this than I do, but, based on the above, I'd guess that your DAC may go into sleep mode if you shut down your B2 after use, if this is an option for you.