I also believe an external DAC is the way to go. What digital source(s), other than the TV, will you use? This is important when considering your input need for the DAC. I believe there are several integrated amplifiers that will serve your 10.1s well and leave funds for a DAC with both purchases keeping you within your ~$800 budget. If you are willing to buy used the AG marketplace is a good place to look.
Integrated Amp Vs. Outboard DAC
Hi, I wanted to see what the prevailing opinion is out there. I am trying to put together a decent mid-fi system and am stuck on what to do in terms of amplifiers. In your opinion which is better an integrated amp with digital inputs or one without and an outboard DAC? I plan on using the system in my main living area and it needs to work with the tv as an input and a digital source. It needs to be easy enough for the kids and wife to use. At this point what are the pros and cons of going with one or the other?