@depthgrammar
It can be done, but I am not sure how USB-in (stick/hdd) and USB-out (dac) will sound. You can shot down individual USB-ports, but the in and out will still share bus. Instead you could load the files via WiFi, and output them via USB, each has a separate bus.
Using piCorePlayer to stream, and LMS to serve, the iPeng app will let you control playback from an iPhone. You will need WiFi (or ethernet) for the two (LMS and iPeng) to converse.
I wanted to build a setup like the one you are proposing. In my case the DAC's coax input was superior, so I went with Allo Digione Player (which at the time only came with rpi 3b+). I tried various distros, and eventually ended up with the above mentioned pCP/LMS/iPeng constellation. In order to be able to use iPeng, rather than turning on WiFi, I connected the pie to my home network via ethernet (using home plugs, the modem/router is on a different floor).
This streamer/server setup worked, with one or two caveats. The intial hard drive I used required more power than a single rpi usb-port could provide, so at first I used a double usb-chord, but then ended up using a separate external usb power supply. This was with rpi 3b+, with rpi4 things might be different, I don't know.
Second caveat is the fact that LMS works as a server, and needs to be shut down properly (using the web gui), rather than just pulling the plug. Otherwise it might not find the connected hard drive, and you will need to remove and reinstall LMS, and mount the drive again. An annoying and time consuming process.
Late 2020 I stumbled across the thread below, and decided to make a change to the setup above. I got the RPI4, found an enclosure (Flirc) with sufficient (passive) cooling, and split up streamer and server. Today Digione (rpi3b+) runs piCorePlayer in player mode only, the new unit (rpi4) also runs piCorePlayer, but with player turned off, and with LMS installed and running. Both now use WiFi to communicate. In additon I did some of the tweaks suggested in the thread below.
An informative thread on rpi4 as streamer/server..
https://audiophilestyle.com/forums/topic/60691-how-is-the-pi-4/