Wadia have redeemed themselves.
Got my replacement 121 Monday from TTVJ (Thanks for all the help Todd) and this one is quiet.
I spoke to Wadia's tech support before my replacement was sent to make sure the problems had been corrected. I was told that there were 2 software updates and the grounding circuit had been improved.
Now I'm happy with my unit.
The most noticeable thing about the Wadia is the clarity & resolution that lets you hear deep into the recording.
As a headphone amp, it has no trouble driving any of my lower impedance phones, but the real test was to try the HiFiMan HE-500's. Happy to say it will power them quite well. To confirm, I connected my Bottlehead SEX amp (2 wpc) to the outputs of the 121. They were pretty close, and the Bottlehead did have a little more weight to the bass when the music got very demanding due to the higher power reserves, but the Wadia was perfectly fine for the majority of what I was listening to.
A nice feature of the 121 is you can leave the volume all the way up when feeding an outboard amp from the line out, but as soon as you plug into the headphone jack, it cuts the line out signal and drops the headphone volume back to where you had it so you don't risk blowing your phones out with the excess volume. Very useful if you have it feeding both a speaker and headphone systems.
So far I have only used it with headphones, but I may put it to use in my speaker system this weekend to see how it compares to my main DAC (PS Audio Perfect Wave MK II).
The relay clicks are still pretty loud when changing sample rates, or when your computer first connects with the DAC, but that's really a minor thing I can easily live with.