I use IRiver IHP with 40 GB hard disk with Audio Alchemy Dac-in-the-box as DA converter and Audio Alchemy DTI+ as jitter corrector.
IHP has optical digital output (Toslink).
Detail and resolution with external DAC are much better, and DTI+ helps to soften the sound in a good way, it removes the sharp treble typical for low quality cd-reproduction.
I use mostly .wav file format (uncompressed), because with my Etymotics ER4 and either Cosmic or Airhead amplifier I can hear a noticable difference between wav and mp3 files.
As much as I know, IRiver IHP is the only portable player with digital output that reproduces wave files too.
What bothers me a little by IRiver IHP , is that sound control (equaliser presets like "rock", "jazz", TruBass", etc) influences the digital output as well. In position "normal" it is supposed to be linear, but I would prefer as simple and direct digital output as possible.