Many to choose from of course. If funds are a concern, yet you want flexibility as well. May wish to try the Emotiva XDA-2 DAC. At $400.00 and 30 day trial. Can be used a pre-amp and has remote control. Hard to be burned and you may find you have a gem. I have the XDA-1, and find it hard to fault in any measure.
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The implementation of a volume control in a DAC/preamp can be complicated and expensive when done correctly. Many digital attenuators simply subtract digital information to lower volume.
I would suggest you study the Empirical Audio Overdrive DAC's method of attenuation as a benchmark. Keep in mind your purchasing two components in one box. If your media is predominately digital keeping everything in the digital domain is becoming a very good thing.
"Do some DAC units have the preamp built in? I am wondering if computer to DAC to amp is the right way to do this. "
Absolutely. Next to jitter, active preamps are the biggest impediment to good SQ. Here are four ways to do this:
1) Get a DAC with a really outstanding volume control technology and sufficient drive to go to amps directly.
2) Use 100% software volume control - this will impact sound quality because you will need at least -20dB of attenuation
3) Use a DAC with gain settings that allows you to reduce the volume using software controls, but limited to about -10dB. This will not impact sound quality.
4) Use a non-volume control DAC to feed a passive transformer linestage (TVC). Decent ones start at $1500 and go to $8K.
"Also what file type is best to build my library with."
If you want the very best SQ, then .wav is it. It may not preserve all of the tags and album art. If you care about tags and album art, then FLAC for PC and AIFF or ALAC for Mac. Even if you have everything stored in ALAC or FLAC, you can change it back to .wav successfully using good tools like dbpoweramp or XLD for Mac.
Mabonn - 2X bigger.
David12 - do you have acoustic treatments in your room? Are your speakers optimally positioned and toed?
You should be getting pinpoint imaging, soundstage well outside your speakers and 20-30 feet behind them. If you dog jumps and looks around when the music comes on, you know you have it. If you can go into the adjacent room and it sounds like a live concert coming from the other room, you have it. Otherwise, not.
It takes some patience and tweaking to get even the best systems to be dynamic and live sounding, and most of all, resolving.
If you are using an active preamp, all bets are off. You probably will not hear these differences.
The Dspeaker Antimode Dual Core 2.0 ($1200.00) is a preamp with a built in dac and room correction. You will need an outboard device for streaming, but the D/C does have a USB input. Match the USB input with an IFi IUSB ($200.00) and run the D/C with a 12v linear or 12v battery power supply and you will have a very good sounding system.