The power supply can affect jitter from the digital outputs, but the Squeezebox is low jitter to start with - far, far below the amount of jitter required for audibility. I would suggest that you buy the Squeezebox and leave it unmodded - it's a well engineered source that will sound exactly the same as the digital out from some monstrously expensive CD/SACD transport.
EDIT: Dynobot, just looked at your site as recommended for looking at in above posts...Linux and OS are more analytical sounding than Windows? Assuming you didn't screw up the configuration for bit-perfect playback on one of them, which, judging by your site, seems somewhat unlikely, how does that make any sense at all?
EDIT2: Looking further, why would any of this stuff affect sound? Optimising RAM latencies? Reducing CPU usage? What is the point of all that, aside from making your computer nigh incapable of doing anything apart from playing music (referring explicitly to the mass service disabling here)? Operating System Jitter? Really? Please tell me you don't have audiophile SATA cables...
I am not sure if this is (only) jitter but upgrading Duet's power supply from the stock switching crap to a linear one makes huge positive difference on all Audio GD dacs. It was audible on Lavry.As for modding, I described that Lampizator SPDIF output mods which I linked before did not audibly help (again: only Duet). I'd tend to believe that clock upgrade can make a difference even in case of Touch.
I would avoid statements like "well engineered source will sound the same as very expensive CD/SACD transports", let us leave that sort of things for the sound science forum -- there's more than enough of that stuff..
Apparently Squeezebox Duet is not a well engineered digital source, anyhow. Both USB transports I tried, HiFace Evo and Audiophilleo 2, are quite in another league than the Duet, far better. But again,I hear this mostly on various Audio GD which are sensitive to SPDIF quality. The differences were not very pronouncable on the Lavry where I exactly failed blind testing between the Duet and Evo.
Dyno: the reason I am asking about the PSU is because most opinions on slimdevices forum are that in case of Touch (quite unlike as with the Duet) linear PSU affects only analogue performance and does not improve SPDIF quality.
Also I am curious how you rate Touch as a digital source compared to the best sources you heard. Is it any better or the same?