I'd buy the DAC and use the Arcam as a transport. DACs have really improved in the last couple of years...
I also owned the Arcam FMJCD23 for several years. A couple of years ago I tried several DACs in the >$500 range (used). I ended up with an Audio Mirror D1 that had been fully modded by Reference Audio Labs. It was way more what I was looking for in digital and soundly outpaced the Arcam. I agree with Mattmiller... find a newer DAC you like and transport the Arcam.
Usually the 1st thing to fail in a disk player is the transport (mechanism, laser) . I would put my money into a DAC rather than upgrading older player. You will have greater flexibility down the road with a DAC. When you need to replace the transport, this can be accomplished at less expense as you already have a good DAC.
I feed my Arcam DVD137 to a Bryston BDA-1 for CD and DVD playback. Direct to Pre for SACD. The DAC is also used for computer audio via USB/SPDIF conversion.
The Chord Qute may be a very good choice. Among other things, it seems to have reclocking to hopefully manage the very high jitter that you can expect from the CD transport.
You could also leave your Arcam attached to the digital coax input while running hi-res computer feeds via asynch USB port.
But don't be too surprised if your standalone 23t with its classic dCs Ring DAC technology still holds its own for 16/44 playback.
This should be interesting. If you can, please post your decision and impressions.
Where I live, my ability to audition equipment is very limited. So, while I'm interested in hearing the Bryston and Chord DACs, I can't. Any purchase decision will be based solely on opinions I get from this forum or from Stereophile reviews/recommendations. Appreciate the input. I'll let you know what I end up with.
In 2012 I sold my Meridian 800DAXv4, this year I bought the Olive 06HD. When you hear this level you will never buy a cd player again. You would be a fool. It has more weight ( 132 db) and less jitter than the best cd player you can buy for money. I can get almost all HD recordings for free. But also cd's sound better than I ever heard on very expensive highend players.
I would go the DAC route. The QuteHD with a nice linear power supply is very nice. I thought I was going to use my transport for ever but once I experimented with PC based music, there is no looking back!
The QuteHD gave me the chance to try out USB based computer audio and one thing led to another. Believe it or not, but you can get great sound from a computer.