Well that's a loaded question isn't it? The track in question is 'Hotel California - Unplugged' right?
Four things stand out to me as being possible in this comparison, which isn't really a comparison given that it looks like there has been some time between listening sessions. Our audio memories aren't very accurate for using in audio comparisons.
- First of all, the track was played from a laptop to the DacMagic so there may have been some DSP going on with the laptop software that was playing the track. This is quite common and could vastly affect the sound of the track being played. What you described seems to me like there could have been a 'wide' or 'surround' processing field applied to the music from the laptop.
- Secondly, the track itself may be mastered poorly and the X5 is simply revealing the flaws in the recording leading you to believe the player is at fault when in fact it imay be the music file, but I doubt this is the case here.
- Third, you may simply like the ESS9023 Sabre DAC in the DacMagic more than the PCM1792 DAC in the X5 and prefer it's audio decoding for acoustical music. You need to keep in mind that the DacMagic can't play files directly (requires a laptop) and has no interface or storage capabilities so the cost is not out of line when it comes to competing sound quality with the X5. The amp in the DacMagic is also weaker and there is no battery to increase costs.
- Fourth, when you first heard the track with the DacMagic did you hear any other qualiy audio gear previously? I'm talking about dedicated gear, not mainstream Apple, Sansa or Sony stuff (nothing wrong with Apple, Sansa or Sony gear if someone is happy with it). Your perspective changes the more you listen to dedicated quality music reproduction so what was a huge leap in quality to you before is now a minor difference and the "vast improvement" isn't as vast anymore. My advice would be to listen to the X5 for a week exclusively and then go back to the gear you felt was better. Then you'll likely have a different perspective on what you feel is better. It's all about perspective.
Any or all of these points may be true or false. I'm just taking shots in the dark given the information you've provided.
I'm not including the amp section in this comparison given that the more powerful amp in the X5 should provide more dynamic range headroom which doesn't match with what you've reported in your post. Also, another way to improve/personalize the sound from the X5 is to use a portable amp. There are a variety of options and the line out from the X5 is very good.