Hi teknikk7!
Check out Musical Fidelity's V-DAC II. It's a good buy for around $350 retail. If you can pick up an Oppo universal disc player, even better. Remember this: the music cannot sound any better than the signal coming out of your DAC. Bad DAC = Bad music. Having said that, one of the best DACs out there is in your iPod. Seriously. IPods have awesome DACs. Even the older iPods have had awesome DACs for the last ten years. I use my iPad as a DAC and it plays lossless files like a BOSS.
2nd post I see! Well in case nobody has said it to you yet, welcome to head-fi and apologies about your wallet.
Anyway, I can't speak for the others, but personally I have been using a Schiit Modi with a Woo WA6 and I can say that it sounds superb. Also the Modi is a bargain at $99 so it's really a great place to start. I personally don't believe DACs are very important in the chain for good SQ. Recording quality and good headphones should come equal first with a good amp being a close second depending on the headphones. DACs as a close number 3 if you have a bad soundcard and finally, I'd place cables a solid fourth.
My rig: