It's not a good idea to look to spend $500 on a DIY DAC.
To design a DAC that justifies that price requires a lot of experience of PCB design techniques and sophisticated (read expensive) test gear.
It might be possible for an experienced engineer to achieve a very good performance based on experience and sheer technical bravura, but to verify it requires test equipment.
You will find those, such as Telstar, who insist that the ultimate performance is achieved by listening to the final product. You will find though, that very few of them are actually designers, they're afficionados and pundits. Those designers who operate on that basis are almost certainly commercially motivated, i.e. they are trying to sell you something, something produced at comparatively low cost, and sold at a vastly inflated price. Frauds, not to put too fine a point on it, but I think we have reached to point with cables where most commonsense individuals recognise that high-end cables are a fraud..
If you must spend a lot of money on a DAC, and IMO, $500 is a lot to spend on a DAC (too much when a very good soundcard costs <$200), buy one produced by a reputable company and one that is accompanied by extensive documentation showing a very good technical performance. You can figure out which have a very good technical performance by comparing the numbers from a few well-specified soundcards and reading some reviews. It'll quickly become clear that 124dB output SNR trumps 109dB. Look here:- http://sound-cards-review.toptenreviews.com/
In some instances some effort spent on quieting (both electrically and acoustically) a PC will provide a bigger performance boost than spending a lot of money on a DAC.
Don't get me wrong, I'm a big DIY enthusiast, but you have to be realistic about what can be achieved on an individual's test-gear budget, and very few DIY designers have access to company equipment. At the very best an enthusiast is likely to be using a top-end soundcard as part of their test setup.
Finally, it's worth bearing in mind that while the exact limits of human hearing are not well defined, it is likely that much comparatively modestly priced equipment, such as the O2 and the ODAC already exceed the limits of human perception.
Edited by wakibaki - 8/25/13 at 2:55pm