Help with decision...New CDP or add DAC to DVD?

My old 16 bit CDP just doesn't cut the mustard any more. I'd appreciate advise on whether to buy a new CDP versus simply adding a good DAC to my Sony DVP-s300 DVD player via digital coax. The latter would sure simplify things. Budget in either case is around $400. I've read somewhere that DVD laser heads can't really get the most from audio CDs...is that true? The rest of my system is simple; Parasound receiver and Vandersteen 3A speakers.