I gotta jump in on this. Consider me a heretic and a philistine. I own the HD800 and have my own opinions about it. Consider my viewpoint that of a vocal minority screaming to be heard.
Question 1: Would a beginner really notice a difference with HD800's between my current setup (PC to desktop speak to headphones) and improved equipment?
Sure. A better amp will bring out the best in your equipment. With respect to the HD800, I can run it off my iPod or PC and get great sound. What I don't get enough of is bass. It needs a good amp to get the bass.
Question 2: What extras do people usually buy for their headphones? DAC, Amp, Cables?
I don't have a DAC (digital to analog converter) because there are only one or two digital devices that dock with the iPod (both of whom are overpriced), which is what I use to store and play my music. People with CD players, however, need a good DAC since most amps don't have a built-in DAC. I also never changed out my Sennheiser cables for after-market cables. Some report great results from doing so, but I was so thoroughly impressed with the HD800 - even off an iPod - that I never saw the need to spend big bucks on a cable.
You definitely want a DECENT amp. By decent, I'm talking about something costing at least a few hundred dollars, not a $40 cMoy or a $100 Pimeta or a $150 Mini3. You don't need a tube amp. What you do need is something that can provide enough power to your HD800 to let it handle highs and lows in a controlled manner. I have an M^3 with a variable bass boost. The M^3 is a DIY amp designed by the AMB team. It uses three channels (the third channel prevents undue interference between the first two channels as they share a common ground wire) utilizing mosfets (hence the MMM name). It's a very clean opamp-based solid state and a tremendous bang for the buck. With a regulated power supply (to prevent current spikes that interfere with performance) it's a very smooth ride. The variable bass boost actually helps me compensate for tracks that are cold and thin. I like it because the HD800 doesn't color its performance, which means it's never too warm. I can bring up the bass where needed. On other headphones, including the T1, it's impossible to lower the bass when it's overbearing.
Because of the added STEPS PSU, my setup costs around $500, though you can find a good deal here and there. An M^3 using just a wall wart could be gotten for $300 to $400. I would highly recommend the bass boost as it really helps with tracks that seem unusually cold and thin.
Question 3: What does the DAC do? Does it replace the sound card (since the sound card outputs analog)? Does a DAC require OS (windows 7 64-bit) driver software? Is it necessary or just an improvement?
A DAC just converts digital audio to analog. Most amps input analog, though a growing number of the newer and better ones will take a digital input. If you're using a digital device - like a CD player - you'll want the best analog converter you can get. Since I use an iPod, I have limited choices and just use the 10-pin to RCA converter ($50), which plugs directly into my M^3.
Question 4: I feel that upgraded cables for stereo equipment is a scam - nobody in a blind test can tell the difference between $1500 cables and $2/foot hardware store cable. But everywhere I look, people are very emphatic that headphone cables are very important. Do headphone cables actually make a difference?
Some say yes. My wallet says no. And yet, my HD800 experience is out of this world.
Question 5: The important question! Given a $400-$500 budget, a PC and a pair of typical desktop speakers, and the Sennheiser HD800's, what is necessary to buy (if anything) to improve the sound?
You need an amp. The amp is the number-one factor as far as getting great sound out of an HD800. There are other factors to consider: the tracks you use, the quality of your source player, the quality of your DAC (if you need one) and maybe the cable, though the cable with the HD800 worked just fine for me.
BOTTOM LINE
To the extent people are telling you not to buy an HD800 unless you can afford a bunch of other items, I think you're getting FUD (fear, uncertainty, doubt) rather than than facts. You do NOT need a bunch of extras to hear an immediate difference between your HD600 and an HD800. You're hear differences right out of the box (though my HD800 did sound better the longer I had it). To be sure, you can improve your gear by having better tracks, a better source player, a better DAC and maybe even better cables - but what you most need is a decent amp.
A decent amp.
You don't need tubes, though many great amps use tubes. In fact, tubes are slower, albeit warmer, than solid state. The thing that most distinguishes the HD800 is its speed. Because its driver is so responsive, there are really neat details you can make out, even with less exalted gear.
You don't need a package of unicorn tears to get great sound out of an HD800. I'm doing it off an iPod. My M^3 helps, especially with the bass. Don't let the naysayers - many of whom don't even own an HD800 - discourage you from buying what may be the finest headphone you'll ever own.
