Some clarifications and personal opinions, folks, but aiming to help!
xD ^_^
That DSS from Turtle Beach looks ideal. The original DSS seems to be discontinued and might be harder to source. Is the DSS2 just as good or was there some 'magic' in the DSS original?
Well, the DSS "original" is recommended because it's easily found on eBay for $30 or less. At least, it was super easy last year, I saw a seller with a bunch of them and many other sellers. FiiO does make an optical converter, the D03k or D05k, but I'm pretty sure it costs more anyway. There's also a FiiO stereo wireless transmitter too; again, more $$.
Dss2 dropped Dolby headphone and uses TB's own surround processing. I only had the first dss, but read many places over the years that the dss2 didn't sound as good.
Dolby Headphone and licensing adds to the manufacturing cost, yes. The DSS2 has a Cirrus Logic DAC chip, and actually sounds pretty good from what I've read (search user i95north in this thread for owner impressions). It still has Dolby decoding, but after that step it uses Cirrus' headphone surround mix. If you don't need headphone surround, apparently the DAC/amp is supposed to be slightly clearer.
DSS had 7.1 processing, the DSS2 only has 5.1 because Turtle Beach realized hardly anyone used the 7.1. Sound-wise, the DSS2 has a slight edge, imo.
This has been re-tread a few times in this thread too, both units can receive the same Dolby 7.1 signal and decode it properly, it's just that Turtle Beach's marketing gave people the impression (with a picture of 4 speakers in a video, and 5.1 written on the box) that it wouldn't "read" the 7 speaker directions. The DSS2 does, it just uses Cirrus' headphone algorythm for the output while the original DSS licensed a different Dolby product, "Dolby Headphone," for
it's output.
Confused yet? Both have Dolby Digital Live (5.1/7.1) input, but they have slightly different headphone surround outputs. If AngryGoldfish is in a headphone surround thread and he doesn't want to use headphone surround, then either will probably be fine.
I recently mentioned that the K267 at $129 from Massdrop is the best closed headphone I heard under $200. Only other closed headphone I liked in that price range was the HP100/HP150.
I don't like closed headphones because I have personal fit, heat, and comfort issues, but Change has a good ear for these closed headphones (and thumbstick covers) and I'd trust his recommendation here. For open headphones in this price range, I'd still stick with recommending an AKG Kxx or K612 (the latter if you've got a loud amp where you use like 20% of the volume), I've found the bass and the whole frequency range satisfying and energetic for both of these all-rounder suited headphones.
The Schiit M&M stack is solid and has decent performance, but I was a little unimpressed and found it a bit dry. I heard it and thought "Oh. Ok. That's clear, I guess that's pretty good." However, it didn't have any qualities that left me enchanted. I'd suggest at least a Vali instead, or a Garage1217 amp, or if you want a capable/transportable all in one I suggest a Creative E5 or even better the G5 whenever it comes out next month (if you want E5 + console gaming surround).