Here is a quote from HeadRoom which I fully agree with:
As mentioned above, the source is generally (keep reading!) the most important aspect of an audio system. We build a variety of digital to analog converters (DACs) to further improve your audio source. HeadRoom amps with internal DACs, and our stand-alone DACs, both contain high quality DAC chips in our designs; and, these contemporary high-end digital recievers and DACs are extremely good at reducing or virtually eliminating jitter from the digital bit-stream. Now, here's the exception to our rule about sources being so critical: when constructing a front-end for your stereo system, it is much less important where the digital signal is coming from when a very high-quality DAC is used. We've even found, in fact, that sometimes very expensive CD transports sound only slightly better than the digital output of inexpensive CD players or USB audio outputs from computers when using a good DAC. So, keep that in mind when putting together your rig!
For many of us starting with a headphone that matches your needs both in sound and design quality is preferred because it has the most dramatic difference in sound. An amp and DAC should basically just keep the original signal in tact unless you want an amp to add color to the sound which is more easily done with the headphones.
What headphones / speakers do you currently own / listen to?
Here are some great headphones to start off with:
1.) Philips Cityscape Downtown ( bassy, comfortable, great sounding, cost less than $100 new )
2.) Creative Aurvana Live! ( neutral, comfortable, a little flimsy, cost less than $100 new )
3.) Audio Technica ATH-M50 ( neutral with some good bass extension, closed, can clamp the head too much if not stretched, cost less than $150 new ) These were my first real upgrade headphone.
4.) Sennheiser HD-650 ( neutral, soft sounding, easy to listen to, can be a tad distant sounding at low volumes )
5.) Denon AH-D2000 ( a great headphone, very neutral, sealed, not good for portable use )
6.) HE-500 ( great neutral sound especially from a neutral amp, comfortable, excellent performance for the price )
As for amps take a look here to start:
I used the Total Bithead for years and loved it, but it tends to be susceptible to EMI noise from say your phone or iPod.
The O2+ODAC combo is an excellent performer for the price. It sounds identical to my Grace Design m903 which costs 5 times more.
Let us know what you settle on and I hope you find something fun and exciting!