You are correct - the Sonos has a DAC, but it's not audiophile quality. The things people add in between that and the outboard DAC are re-clockers, upgraded connection posts, and upgraded power (you can even have a battery pack rigged to remove the AC/DC conversion that causes problems).
You'll get plenty of people arguing about optical (Toslink) or coax (SP/Diff) connections. In general, coax seem to be the more consistently implemented connection on most devices, but some people prefer the sonic signature of optical. It comes down to trying each and seeing which you like better.
If you like the Sonos concept, I urge you to try the Slim Devices Transport. It's more expensive, but it is an audiophile quality piece of hardware. I chose against it because it is a little too refined for my tastes (I prefer the more vivid sound I get from my PS Audio DAC). If you are considering mods to Sonos, you will end up ahead of the game with the Slim Devices if you like it out of the box. They offer a 30 day in-home trial - if you don't like it, send it back.
You'll get plenty of people arguing about optical (Toslink) or coax (SP/Diff) connections. In general, coax seem to be the more consistently implemented connection on most devices, but some people prefer the sonic signature of optical. It comes down to trying each and seeing which you like better.
If you like the Sonos concept, I urge you to try the Slim Devices Transport. It's more expensive, but it is an audiophile quality piece of hardware. I chose against it because it is a little too refined for my tastes (I prefer the more vivid sound I get from my PS Audio DAC). If you are considering mods to Sonos, you will end up ahead of the game with the Slim Devices if you like it out of the box. They offer a 30 day in-home trial - if you don't like it, send it back.