I like Bitperfect as a $10 bolt-on to iTunes that seamlessly plays a mix of HD and non-HD files. I think it sounds better than iTunes alone in general, but haven't done any sophisticated listening comparison to validate that—it's worth it just to play the mix of format alone. You might also look into Audirvana, Pure Music, Amarra, and Fidelia.
As a value proposition for a DAC/headamp combo in this price tier that's somewhat portable, the Dragonfly is very, very difficult to beat. I shopped it against the Schiit Modi/Magni stack (compact, cheaper in the U.S., but not really portable) and the iFi iDAC. If you're in the U.K., take a look at the iFi. Gets great reviews and seems to be more available over there than here. And you can look forward to spending another $550 on the iUSBPower and iCAN.
Edited by Aerocraft67 - 2/6/13 at 2:57pm