Yes but I really wonder if Z1 used as a DAC feed via USB by an iPAD will sound as good as if the Z1 plays from it's internal memory ! I doubt !
You have asked with too many variables in the questions . But your assumptions are correct, neither streaming nor USB digitally feeding DMP is going to sound as good as DMP and a proper SACD DSF or CD and WAV is going to sound on the DMP.
These are a can of worms, and I will just lay out what I have tested and observed so far. You can test it and decide for yourself , and not necessarily be in agreement with me. But I will share it out here anyways.
1/ internal memory and MicroSD on DMP is read and run by Sony Walkman OS. This OS by itself is made for music and by enthusiasts. It is known and revered as the best OS for music. It isn’t available anywhere else, but Sony Walkman and Sony product. Even android Walkman isn’t the same. A few years back when NW ZX2 was released, people dreamed of a system with Walkman OS and touch screen where it wasn’t available and was just a Dream.
2/ Ipad and IOS, I gotta say that IPad and it IOS are a better OS for music and streaming. But it still wouldn’t stack up to Sony Walkman OS. But between IOS, Android, Windows, Linux, then I would rate Linux > IOS > Windows > Android ...LoL...yes I tested it with my ears, and even tried to use the same YouTube ...so, if you wanted to use DMP as DAC, then IOS will sound as the better choices.
When you realized both #1 and #2, then you will be worrying about the Player app, it could be windows media player, jriver, fooBar, HQPlayer.....etc....regardless....non of them is going to outperform Walkman and Walkman OS. You don’t have to take up my words for it, I believe you can hear the differences just fine.
Furthermore, when you realized that much. The reason why DMP has no WiFi and capability to stream online YouTube or QoBuz, Tidal is the complications between compatibility and music performances. That is why there is LDAC. But regardless of what connections as I mentioned, you are not going to get the best of your music by streaming. Maybe trying to find it on an SACD or CD and rip it to DMP and you will enjoy it much better. But if streaming is a must, then LDAC will serve you better. You can opt for Camera kit and USB cable to DMP, and it is better than Bluetooth . It sound a tad bit better (but I rather Bluetooth here), and technically speaking, your player cut down from another fold-unfold processing, but that still isn’t going to smear at DMP and MicroSD storage.
Agree that it's all a matter of personal taste.
I've posted before but I have found that Focal Stellias pair magically with the DMP-Z1 (using the balanced connection). Puts a smile on my face every time that I listen.
Yes, Stellia was great, and so is Z7 MKii. But I love my HD800s, a furutech connector with pentaconn and Litz cooper wires will bring improvements. Non of the dynamic full-size at Canjam NYC would pull me away from my hd800S....not Empyrean....and even so, Stax SR009 and a T2 would make HD800S cry ...lol