I use a Matrix Mini-i (from eBay) and a LD MKVII+ balanced amp and am very happy with the sound. The DAC chips used in the Mini-i are the same (AD1955) as those in the $1000 Cambridge 840C player. The Matrix's amp section actually drives the 650s decently if you want to buy a separate amp later.
+1 on the Matrix Mini-i with the HD650's. I purchased it knowing that the DAC section was pretty decent and the HP amp would do for now. Right now I'm using the built in amp until I can spring for the Lyr.
Just for giggles, I hooked it up to my main system where I have a PS Audio DL III DAC and the PS Audio smokes it. My HiFi system is very revealing.. Martin Logan speakers driven by the new Rotel stuff. I'll probably also get the Bitfrost DAC with the Lyr and move the Matrix to the bedroom.
Listening to Long Road out of Eden by the Eagles through the Matrix/HD650's as I type this and it's pretty decent but I know that the HD650's are capable of so much more.
In your budget range, I would look at the Matrix or the Schitt Bitfrost (not out yet but looks like it has potential based on my research on Schitt).
BTW.. on the cable thing.. I have a Moon Audio Black Dragon cable for my HD650's and it did take away the graininess and some of the harsh edge off compared to the stock cable. Should have been my last upgrade but oh well, Lyr next. Absolutely agree that it should be the last upgrade after source, DAC, and amp. Nuff said about cables :)
Edited by MickeyVee - 7/4/11 at 9:50pm