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The software player (mediamonkey) converts flac files to the proper format when player output is set correctly. From that point the signal needs to exit your laptop without alteration of any sort. The details of computer setup to achieve this vary by OS.
Search on "usb bit perfect" or check the Ayre sight for some good information.
http://www.ayre.com/usb-dac-windows-vista7.htm
Normally your media player (s/w) will uncompress FLAC or any supported format into PCM and apply DSPs such as volume control, equalizer, upsampling/down sampling, etc. before sending audio stream to the driver of your DAC. Data format between the driver and DAC may differ.
To get best sound quality from high definition tracks, you need to get "genuine" 24bits 192khz DAC. "Genuine" means your DAC supports 24bits and (up to) 192khz by hardware. Not by software stream conversions! With genuine DAC and good headphones, you should be able to tell the difference in audio quality between differing sampling bits and frequencies. Especially, 16bits/44.1khz vs 16bits/48khz vs 24bits/48khz vs 24bits/96khz. There are "subtle" differences in audio quality. If you cannot tell, your ears or bad headphones or not genuine DAC might be the cause.