Cheap external DAC for DVD player

I have never used an external DAC and would like to hook one up to the digital outputs my Panasonic 47S DVD player.

1) Can I hook the digital out from my DVD player to an external DAC and then in turn to my 2 channel preamp to play CDs?

2) And use the DVD players analogue outputs to the preamp for watching movies. Or would I still use the external DAC for movies?

Does this make sense.
Is there a benefit to do this with a $110 DVD player and will I get good CD playback doing this?

Which cheap DAC to get?
Scott Nixon or others.

...or should I just get the Oppo 970 and be done with it.
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I use an old CAL Sigma II DAC for improving DVD sound through a two-channel system when watching movies. Sounds great.
I have a Panasonic 47S, Pioneer 563A, and Technics A-10...all DVD players. The Pioneer and the Panasonic were both around $100 or so when I bought them, the Technics around $400.

I've tried them all as transports in the past...the Pioneer was the clear winner. Yea, I could one cheap DVD player be better than another cheap DVD player?...BTW, the Panasonic came in last as a transport.

On reccomendation from fellow Audiogoners, I purchased a Paradisea DAC made by MHDT labs. ONly available direct from Taiwan via Ebay for $500

It performs VERY well
The Creek OBH-14 DAC is a good choice for making a cheapo DVD player sound tolerable in my experience. It has a volume control so you can run it directly into an amp, but it also has fixed level outputs for a preamp. Nice sound for the low bucks involved.

If you do wind up with an external DAC, I would definitely use it for movies too. Just set the DVD player's digital output to convert DD and DTS to PCM.
My Panasonic has a choice of DTS or PCM so which is the prefered output.

Sogood51 and everyone,
Is it worth upgrading to the, also cheap Oppo 970 DVD player to use as transport for audio portion. And output it to a external DAC for the sound.
I understand its performance is quite good for both picture (HDMI) and sound.
I have used a Assemblage DAC-2 for my Techinics A-10 and the results is pretty good.
I am planning to sell the DAC and the Toslink that goes with it. Since optical output is carrying digital info therefore it is less susceptible to noises ..etc I hope I am right on that. You can still use the DVD analog output to watch movie thru the preamp, you don't have to go thu the DAC for watching movie