Tranquility Dac and cable.
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There is much to chose from in the sub-$1000 range. Look into:
HRT Music Streamer II Plus ($349)
Cambridge DAC Magic ($429)
Simaudio 100D Dac ($599)
Musical Fidelity M1Dac ($699)
Rega DAC ($995)
Peachtree iDac ($999)
All these units have received positive reviews and user feedback on various forums. Hope this helps narrow the selection down.
I agree with Sonnyyoung and also recommend
the Tranquility DAC with a Ridge Street Audio Poiema or Alethias USB cable or the dbauidolabs The Essential USB cable.
Morrow MAP4s wouldn't hurt either to make the connection to the preamp.
I cannot imagine you wouldn't like the Tranquility.
One important thing, think about the power cord used to feed the DAC... affects things more than you might imagine!
Great recommendations above. Haven't owned or heard a Tranquility (sadly), but I thought it was worth pointing out that it is limited to 16/44.1 (CD quality) output. Most other DACs here can do 24/96 or 24/192. The significance of this will depend on whether or no you will be playing hi-rez files. That said, the Tranquility also has a wonderful reputation, and I believe there is a trial period for these DACs. And ultimately, this will be about which DAC sounds best in your system, according to your audio/musical preferences.
Logitech Squeezebox Touch for $300 or less. Nice DACs and amazing performance for the money. I love mine, and when I plugged it into a friend's system (he has the same speakers as I do) bypassing his new Wyred4Sound DAC, we were both amazed at the high quality of the "Touch"...it has it's own sound and somehow it works.
While I don't have a DAC suggestion for you, I do have something to keep in mind.
The JITTER from the AE is terrible. Some DACs simply will not like this device. My CA840 CD player sometimes loses lock on the signal and emits the most awful, fingers-on-chalkboard noise imaginable.
No amount of file-fiddling helps. ALAC? MP3? w/wo error correction? no help.
Only thing that helps is to take the analogue output from the AE, which kind of defeats the whole purpose of the DIGITAL part of the equation. Not to mention that the DAC part of the AE is a strictly budget proposition.
TRY anything you are considering with right of return. put it thru its paces and make sure it works with the AE. Or, upgrade to an Apple TV.....