If you add a DAC anywhere, it will bypass your motherboard's built in audio (hardware & software).
Not true. If you add a DAC it will bypass the DtoA on the motherboard, but the motherboard's built-in controller will still be your primary interface and handle everything but the final analog output. If this X-Fi implementation gets the new-ish drivers, it will let you pass all of the processing out via S/PDIF (OP: in the X-Fi control panel, is there an option like "Pass Stereo Mix to Digital Out"?). If you add a USB, FireWire, or PCIe controller you will be replacing the built-in controller with whatever that device brings to the table.
how important is having balanced output?
i found this on ebay which has PCM2704 DAC
i wonder where it lacks, it's so cheap something has to be undesirable with it
http://www.ebay.com/itm/MINI-PCM2704-HI-FI-USB-DAC-SOUND-CARD-BOARD-hi-fi-ELNA-Capacitance-for-it-/260994381452?pt=PCC_Drives_Storage_Internal&hash=item3cc47a368c
Do you have a source that accepts a balanced input?
Balanced outputs (or XLR outputs that are marketed as balanced outputs) are generally better at noise rejection and driving longer runs of cable, especially in noisy environments. They make lots of sense in studios (even project studios) and live applications, but for most home users it's just extra expense that you shouldn't worry about until the rest of your equipment needs it (in other words, at the very high end, XLR connections make a lot of sense, but if you don't have equipment that can take advantage of it, don't worry about it - SE is perfectly fine).
Honestly the onboard DtoA on your mainboard is probably fairly high quality - the bestest DACs in the world only cost a few dollars a piece as raw parts, and companies like Asus buy in quantities of millions; they get discounts. Your board looks like it has an 8-channel solution, which aren't known for being "the best" (they usually don't spec/measure as good as monotonic or stereo D/A converters), but they can be perfectly hi-fi. If your mainboard has no audible hum/buzz/etc from the analog outputs, I'd worry about downstream components more - amplifiers and headphones. Once you get that dealt with, then worry about a DtoA converter or a new audio interface (unless you're going to kill two birds with one stone, and get a DAC/amp or controller/amp combo unit).
If you want to add something, you can either get a DAC (which will accept S/PDIF or AES or something like that), or a new controller (which will use USB, FireWire, or PCI/PCI Express and replace what's built-in to your mainboard). A lot of these devices include headphone amplifiers and some include a lot of additional features, so depending on your needs, it might make sense. If you just need output though, and the integrated isn't bleeding out noise, you're very likely A-OK with what you have.
The trade-off with that eBay device is that you get (max) 16/48 stereo audio and nothing else, and lose all audio control panels associated with the X-Fi or another full-fledged interface. You can replace this functionality in individual applications, for example Foobar has an EQ, but it won't be global (in other words, if you have an EQ you like in Foobar, it only works in Foobar; you don't get it in games). It's a very simple device.
