I currently have a Xonar Essence STX that I am using to drive several sets of headphones (DT990, ATH-M50, Sennheiser 580 Jubilees and a few others). I have read quite a bit about the quality of the Yulong DA8 DAC/Headphone Amp and am wondering if this would be a noticeable upgrade from the Essence STX sound card.
 
The sound card offer quite a bit of quality and has great SNR ratio as well as other characteristics. Its headphone amp also seems to be stellar - able to effortlessly drive any of my headphones.
 
The question comes down to: How good would the improvement be in doing an STX -> DA8 upgrade? I know that this is subjective, but it seems hard to believe that an external DAC such as the DA8 can do any better than the STX, given its measured real world performance.
 
Thanks for any tips and advice

I've heard both. Yes the DA8 is a step up, but it's not huge. It's all about diminishing returns in the hobby and what is an acceptable expenditure to you to achieve those gains. Personally, I'd spend the money on new headphones before dumping that kind of money into an external dac/amp. Heck, for the money you could get a better/secondary power supply or build an entirely a separate music computer.

So what is it specifically about the Yulong DA8 that makes it sound better than the Xonar Essence STX? Is it better in all areas or only in most? If you could characterize the differences, I would really appreciate it.

I am only going from memory, so I can't give precise comparisons. I can only make general impressions of each on their own. Differences in dacs are honestly very small once you get past the realtek motherboard options. Amping makes a bigger difference overall, or at least has a higher threshold of diminishing returns.
STX: good sound, a bit flat though, but lots of power
DA8: very good dynamics and staging
And of course these impressions are completely meaningless.
 
But I return to my original point: spend the money on headphones first. There's no sense matching a $200 headphone to a $1200 dac/amp unless you just want to throw money around. For that kind of cash you can pick up a used HD800 or a new LCD2 or HE-500 etc.