I have both, so allow my to toss my 2 cents in...
First, I should point out that I haven't had the uDAC-2 very long. I just got it in, so it isn't burned in yet.
With that out of the way, I would summarize the differences as follows:
- The biggest difference is, as has been pointed out above, the fact that the Fiio E7 can be used as a portable headphone amp and is battery powered, whereas the uDAC-2 can only be used as a DAC tethered to a computer and required USB power. If you use a portable music player as your primary music source, the E7 is far more versatile. Although many people sneer at the E7's ability as a DAC, it actually uses a well-regarded DAC chip and sounds quite good as a DAC. In fact, I consider the sound when used as a DAC to be superior to the sound quality when used as a headphone amplifier. This isn't necessarily a criticism of the E7 per se, since the poorer sound quality when used as a headphone amp may just be due to the fact that the DAC side of things makes a really significant improvement to sound quality.
- I should point out that the E7 is an impressive package. It is solidly made and includes a protective silicon cover, a line-in cable, a high-quality USB cable with ferrite beads to reduce interference, a (silicon?) rubber band to keep your E7 with your ipod and a velvety slipcover/case (the latter is less useful). All this for £55 is very, very good deal.
- The NuForce uDAC-2 is tiny. It is solidly made, exceedingly simple to operate, and also comes with a USB cable (though without any ferrite beads). The volume pot feels very solid and is smooth to adjust. No problems with balance at low volume whatsoever. Adjusting volume with the uDAC-2 is much simpler than with the E7. But I use the uDAC-2 at work and since it can only be used with my firm laptop, I am essentially limited to the music on my laptop and unable to access the more extensive collection of music on my ipod. Until today (see below) I have had to use the E7 when I wanted to listen to music from my ipod.
- WARNING: SUBJECTIVE INITIAL IMPRESSION TO FOLLOW!!! When used as a DAC, my impression is that the uDAC-2 is neutral, with very high resolution, whereas the E7 is slightly warmer and less clear. I wouldn't describe the E7 as "muddy", but the uDAC-2 does seem to resolve sounds better - possibly even better than the Beresford Caiman DAC that I use at home. To be clear, I am not disappointed or unhappy with the sound out of the E7 when used as a DAC - just the opposite. In fact, when I first heard the uDAC-2, I was initially disappointed: its neutral tone initially seemed slightly thin, and it wasn't until I adjusted that I noticed the greater resolution. If you have used a DAC before, the uDAC-2 is unlikely to bowl you over the first time you hear it. It is more subtle than that. A warmer, more bass-heavy DAC might make a greater initial impression, but the uDAC-2 has a sound signature that will grow on you.
- Volume: when used with my easy-to-drive earbuds, the uDAC-2 is tolerable at maximum volume. The E7 is intolerable before you even hit 30 on its 60-point scale. I have doubts about the ability of the uDAC-2 to drive truly hard-to-drive headphones. Maybe someone else can chip in with their experiences here. I have set the volume limiter on the E7 to 30 for fear of inadvertently blowing out my headphones (and my ears).
That said, I also received a HiFiMAN HM-601 today. Erm.....wow. Wow! It has really blown my socks off. The sound quality is excellent. Not necessarily neutral, but absolutely delicious. It can also get very loud and it actually struck me as very easy to operate, not sure what all the fuss is about. I don't think you need a headphone amp with this at all. And although it is bigger than a full-sized ipod, it is much, much lighter due to the lack of a hard drive. And I love the fact that its storage capacity is essentially unlimited due to the fact that it takes SD and SDHC cards. I will buy a 32GB SDHC card and probably get a second in short order, then just swap them as needed.
Rather than buy an E7 or a uDAC-2, you might want to consider getting an HM-601 instead.
Best,
Adam