Sony X1060 + DAC

You won't be able to fully maximize a DAC since I don't think that can output a digital signal. Unless what you need is something like the Ibasso D6/D12, so you can use it as a DAC+Amp with your computer then as an amp with the X1060 outputting an analog line-level signal through the line out dock connector.

First of all if you want to get an amp (the DAC thing I assume was a typo) you need to consider the best ones in order to consider them an upgrade. The Sonys are pretty good amps and I would not change the built-in one for an E7 - not enough, if any, sound improvement and a big loss in portability.

If you choose something really good to be used with the Walkman than the loss in portability department will definitely be lessened by the boost in SQ.

Yup, a DAC+Amp unit  with analog inputs basically means you only use the amplifier section through there. The digital inputs - USB, SPDIF - use the DAC. And like what Szadzik said, the X's have a good enough amp section. You'd be using really high impedance or low efficiency cans to really need an external amp. Except, of course, if the cans you're using might sound good enough but they drain the battery faster. My HD600 runs well enough on a CMOY but the batt life drops to just over 3 hours.

Well, I don't think you need DAC because that sony x1060 can't deliver a digital signal to a DAC. If you want, you can get a amp for x1060. The WM-port can be used as a line-out dock with suitabe cable.

I just had a mental vision of the licensing cost Sony would ask any manufacturer who came to them with a proposal to build a dock that bypassed the DAC in their players. If Apple charges Pure 5 million (for example - I have no idea what the real figure is), Sony would charge 10 million. Pure and other manufacturers can hope to recoup their investment based on the number of iDevices out there - as much as I like the X, I just dont see the same level of demand. Besides, if you bypass the DAC and the amp in the X, you basically have an 'intelligent USB stick' that you paid top dollar for - kinda defeats the purpose.