Does Apple airport express work well?

My experience is that the problem with the stream cutting out is because of interference from other devices, microwave ovens and cordless phones in my case. That's a problem that is easy to fix by choosing a different channel in the Airport Utility software that comes with the device.

With so many devices competing for wireless frequencies it's inevitable that there may sometimes be conflicts. Fortunately, the utility software makes it easy to switch to a clear channel.

The quality is excellent using the optical output to an external DAC.

You can't connect the USB port on the Airport Express to the USB input on your DAC, optical is the only option. The USB port on the AE is configured for printer output only, there's no music signal available from it.