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Many digital output are the limit for a quality reproduction.
So not always a better DAC give you better sound.
Your digital output could be the limit for the best DAC.
So you have to test the level of this limit.
Only after that the quality of the DAC is the first more important thing.
I use this method:
test MP3 and a wav by the same recording,if the different is very low also at 128kb/s MP3, the output and dac are fine.
I use an Airport Express and DAC with my server system currently. I bought an Audio Alchemy DDE v1.2 used on eBay. With lossless files, it matches my CD player.
From what I understand, Dusty Vawter's Audio Alchemy brand put out some top-notch stuff at very low prices (which may be why the brand is no more). So, many were sold and there are loads on the used market. Also look at Bel Canto and Musical Fidelity.
The Airport has an optical output. You will need a cable with a mini-plug on one end and Toslink on the other. You can accomplish this either with a standard optical cable and a mini adapter, or a specialized mini-to-toslink cable, like I use.
I'm really happy with my setup, and I think you'll be pleased, once you get everything up and running.
The DIYEDEN Musiland MD-10 DAC is very good for $300.
If you want to go *dirt* cheap, try the Chinese-made DAC that's sold at audiomagus.com under the name DAC707 Super Pro. (It's also widely available on ebay-- I've bought from audiomagus.com before, which is why I mention it.) It uses the CS-4398 DAC chip, which is the same one used by, for example, the Esoteric SA-60. It's not Class A like the Esoteric (though I'd love to see what JA would make of it on his bench), but I'd put it (fed from a computer or a decent transport) awfully close to at least a couple of the Class B CD players currently on the Recommended Components list (quickly glancing at the list for what I've heard, I'd say it's about the Music Hall's equal, and about 95% of the way to the Rega Apollo).
The SPDIF cable it comes with is a piece of crap-- throw it away and buy anything better when you get the chance, even a $20 cord from Radio Shack. It's tiny (the size of a deck of cards, and not much heavier) and runs off a wall wart, but if you're a power-obsessive type you can almost certainly find an external power supply with better specs.
Oh. I didn't mention the best part:
Depending on where you get it, it's between $79 and $99 plus shipping. If you don't like it, put it on eBay, and you'll get back most of what you paid for it. There's a USB version as well, but I haven't tried it.
Thanks for the advice. Also, is it better to go from the minijack in the airport express to a coaxial or toslink?
The minijack output is optical, and would require a toslink/spdif converter before the DAC if you wanted to run the signal electrically. I haven't used a converter, so I don't know how it would impact sound, if at all.
If you want easy, I recommend getting one of these:
http://www.impactacoustics.com/product.asp?cat%5Fid=901&sku=27015
That's what I use. I think Monster makes one, also; I believe the one that comes in the Airport Express cable kit is Monster.
So, it is not possible to go directly from the mini spdif that goes from the airport express to a coaxial terminal? My hesitation is because the coaxial spdif offers much higher audio clarity than the optical cable.
The airport express output is a mini-optical jack, like the ones on newer macs.
If you keep the run of optical cable pretty short and straight, you probably won't notice the sound difference between it and SPDIF, at least not on the DACs which you're considering.