Years ago, before I discovered Stereophile, I read Sound and Vision magazine. This would have been back around 2003, and in their annual buyers guide, whoever wrote the introduction to the section on CD players, basically said that the only difference between expensive players and inexpensive ones were the features relating to controls, and that the sound would more or less be the same. I found that curious, in that most of their reviews of CD players or DVD players eventually would mention that the sound was superior when the digital connextion to the AV receiver was used, rather than the analog outputs.
They failed to mention that by saying that, they are admitting that the AV receiver has a superior DAC compared to te player. To admit this and then try to pass off as balderdash the marketing of dedicated DAC components seemed odd. Since the CD era began, I have owned a number of inexpensive players, starting mid eighties with a Technics. I tought it sounded incredible, and that the digital aspect of the recording/playback process meant that any cheap player would sound just as good as an expensive one.
Then I obtained a Sony Disc-Man to use in my car. I was shocked to find the Sony sound superior to the Technics, and after a short time began using the Disc-Man as my home player. I later purcased a 200 disc Sony carousel when my collection outgrew the shelf I had them on. I liked the sound of the Sony, but indeed it sounded so much more robust and tree dimensional when connected via fiber-optic to the receiver. THe Sony by itself had a decent tonal balance and left/right separation, but the presentation was flat. It sounded like all of the musicians were lined up tight against te wall, with no real dept. Through the fiber-optic connection, there was almost too much depth. While I could definitely hear front/back separation, It was like I was sitting in a chair next to the conductor. I had also been using a graphic equalizer, in part to compensate for some road construction related loss of high frequency hearing. So I liked the tone of the Sony plus the equalizer, but wanted some, if not all of the depth available through the fiber-optic/AV receiver combo.
When the old 200 disc Sony became erratic in it's operation, I went looking for a serious CD player. I found a used Marantz DV 7001, which was fairly highly regarded when introduced, if no longer state of the art. But upon first listen I was delighted. The sound was far superior to any digital playback I had ever heard. The tone was almost equalt to the Sony plus EQ, and the depth was great but less in your face than through the AV receiver. For the first year and a half I did without the EQ and did not really miss it, though I have since added it back with fine results. The Marantz offered CD upsampling, which gave a slight improvement, and as a bonus offered DVD upsampling to 1080p, so it is amazing as a DVD player as well.
One of my favorite CDs of my 20s was Living Colour's "Vivid", a most satisfying blend of urban funk and hard rock, fueled by te frenzied guitar of Vernon Reid. As much as I liked it, I always thought Reid's solos were sloppy and out of control. But the first time I played "Vivid: on the Marantz, I realized that I had never actually heard Reid before. He plays with nuance and passion that is lost on an inferior system. On a completely different track, my wife and I enjoy Vangelis and his greatest hits. Again I was stunned upon listening from the Marantz. I was hearing multiple layers and voices of his electronic instruments that I had never heard despite frequent listening.
So my conclusion would be, there really is no payoff in going ultra cheap, at least as far as the DAC in your system. Be it within a high quality player, or as a stand alone component, do yourself a favor and don't just settle for the AV receiver or your cheap player. If I had it all to do over I would get a low cost DVD or Universal player as a transport, so as to be able to take advantage of DVD upsampling to near-Blue Ray quality, and then any one of the outboard DACs in the $500 to $1000 range.