You can use the HM-801 as a DAC without the battery inside, if it's plugged into a power source. I find that the battery drains pretty quickly, or at least does not charge quickly, if I'm using it in DAC mode while it's plugged into the charger.
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Fang, are you still working on a new firmware update? At the very least, we would like gapless playback. I would also add the ability to delete tracks, perhaps by hitting the top right button twice while a song is playing, which would bring up a prompt confirming that we want to delete the track.
I just started using Rockbox for my iPod 5.5g, and it is amazing. It has every feature you could possibly want, and adds more playable formats. Please consider releasing the source code so that the very skilled Rockbox coding community can create a version for the HM-801, since you and your engineer don't seem to have the time to do it.