You're correct afaik; I2S from the USB controller (xmos xu208/216) to DAC. The critical difference is USB is standardized pin out, etc., while I2S is not. It's not the ideal transport between devices, it's meant for internal usage (in this application).
Yes and no.
I2S is absolutely standardized with an option for the master clock, but we're talking purely about the internal I2S connection. With over 30 DAC boards, more than 8 USB boards / interfaces and AK4118 / AK4137 boards, I have never had any functional problems.
But we're talking about external I2S in connection with the industry standard LVDS (which is not tied to plugs or connections), the world's leading standard for external lossless cable transmission over short distances from Inter-IC applications. Incidentally, many devices at home also use LVDS (computers / laptops, monitors, televisions, data storage systems, etc.).
And there is the crux of the matter, no one has ever taken care of a standard, so the manufacturers have their own assignment.
That an HDMI cable is used for transmission is more of a coincidence, but above all it was available and cheap (plugs, sockets, cables). The transmitted signal has nothing to do with HDMI.
There are approx. 4 standard assignments via HDMI plugs that can be set for USB interfaces / sources (e.g. Topping U90, Singxer, Matrix, Gustard etc.).
Many keep crying that there is no standard.
If a manufacturer uses its own assignment of the HDMI connector, then he does not want his device to be compatible with other devices via this connection or to be used. That is the decision of this manufacturer, even if you can handle it with a special cable.
The transmission of I2S using LVDS is also superior to all other types of transmission (AES, SPDIF, optical), including USB (who came up with the idea of laying a very dirty power supply within the shielding of a 2-wire data line?).
So if you have a source device that outputs the digital audio data directly as I2S / LVDS and the cable path is less than 1-2 meters, then it is the technically best and simplest solution. E.g. with the internal tapping of the I2S signal in a CD player and connection via an I2S / LVDS HDMI converter.
Now comes the biggest BUT, there are currently only a few real source devices with an I2S interface.
However, if you do not notice any difference in sound between the various connections (this is also my experience, not always, but often), it does not matter in the end.