This may not be the correct place for this but can somebody please give me a broad and quick explanation of what the differences are between a source, an amp, and a dac?? A source would be like my Zune, or receiver, right? But if my receiver is an amp technically can somebody please explain the difference? Is it just that what I would buy is dedicated to headphones? I'm confused as to how all of this connects and what is necessary for a beginner and what isn't.
A source is your Zune/receiver but also includes the quality of music. Most people here will recommend 320kbps, but that's wasted space. V0 quality is capable of reaching 320kbps, but only when necessary, thus maintaining the same quality as 320, but saving more space. If your receiver is an amp, then it does what any other amp would do which is power headphones/speakers that need it. A DAC is generally found with an amp and takes the digital signal sent from a computer or digital audio player (DAP) into an analog signal that then reaches your headphones. Certain DAC's produce different tones/clarity. Your receiver won't have a DAC though since it's intended for CD players, or other things already with a DAC to plug into it.
As to what you need? Nothing but your headphones. As to what you'll want? Well that all depends on how happy you are with your sound from your headphones and if you want to get a "better" sound. Going from my iPod to headphones directly sounded fine to be honest. Eventually I wanted to see what was available out there, so I bought the E7, and the FiiO L3 LOD (which is the line out dock of your Zune/iPod) which I noticed a tad bit better sound quality overall. Was it worth the $85? I don't know honestly, but it does increase the listening experience for me.
As for your Ad700 unless you want to use them as a beater pair or something to lend friends, then sell them here for $80 or so, depending on Amazon prices, and put that money towards an Amp/DAC if you want.
Thanks so much for the info, this definitely clears up my misconceptions, I wasn't aware that the source also included the quality of the sound file, which I have definitely noticed with some of my music, like fuzzy background noises that make a song unenjoyable.. Although it is pleasing to know that my headphones are quality enough to point out these inaccuracies unlike previous earbuds/headphones