I was rather puzzled by the idea of using an external DAC/Amp combo thru Line out USB dock from the iPod.
Well, for some brands (preferred unnamed), some people claimed that the DAC section of the external DAC/Amp improves the overall sound like it's night and day, while some users experienced frustration over their experience of not experiencing anything significant from the DAC/Amp since iPod-> Dac/Amp itself costs much more higher than iPod->LOD->External Amp.
Honestly, any idea if DAC itself matters much? I mean, things like the DAC in Fiio E17, is it much more different (sound quality wise) than something like in the $500 above region? Or the DAC in $500 above Portable Player is much better than something cheaper like the ones offered by Sansa?
The DAC is where it all starts. Of course it's important.
The issue is about how much different one DAC is compared to another. The idea behind external DACs for an iPod is that the external DAC "must" be much better than what the iPod uses internally, better than what Sansa is able to achieve for ~$30. However, if you look at measured frequency response, distortion, noise, jitter, etc., it turns out that many of these cheap devices do D/A pretty well these days, relative to the imperfections of headphones used and relative to what humans hear. That seems to hold up in what few fair listening tests are run. That said, it's possible for DACs, expensive or not, to be different in sound quality (either intentionally or not).
If you don't hear any noise or have other problems, I wouldn't worry about it or what others think.
We can do a pretty good job measuring and quantifying what we hear, but mapping out what we perceive is a different matter.
Any difference in sound that can be discerned should be significant enough to be (easily) measurably different with our current instrumentation.