I am not totally against spending a $1000 for a dac if necessary. That is, if one of the $500 dacs I mentioned does not make much of a difference, but a $1000 dac like the dac1 would make a big difference, then I would save up for the dac1. I am always trying to find the point of diminishing returns.
I've heard good things about the dacs I mentioned. Also, two of them are able to be modded if I want to upgrade in the future. I just don't know how they compare in stock form to the dac in the squeezebox. If they are comparable, which I somewhat doubt, then I would simply listen to the squeezebox as is for a year or so, and then when I get the urge, upgrade to a dac that might make have a more noticeable impact (e.g. Dac1).