[magconrpes]

OK, here's how I think this works.  Would appreciate confirmation or correction.
 
The media server just streams the bits in the file over the network to the client.
The client performs the decoding of the file into a PCM stream (i.e, converts mp3, flac, etc to pcm) and sends that out the USB.
The DAC obviously does the conversion to analog.
 
If I have this right, then only the client needs to be able to handle the file formats and bitrates I am interesting in, correct?
The DAC just has to handle the bit rate.  The media server is just cataloging and streaming bits without any processing of the data.
 
Do I have the right?

 

[epyon415]

That is correct sir. The client machine or application will connect to the server and decodes the file format.