A friend of mine has an ARC CD3 Mk2 and I own a CD7. The sound of both units improved when we connected an Exactpower EP15A. Similar results results were also obtained with a PS Audio P300 230V unit.
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I had this player. It is excellent. I would not mess with it. Either get somethig else, like the CD7, or get an external DAC but you will need to spend a lot to get an upgrade from CD3MkII.
BTW, if you are not running it via XLR outputs, you are not getting the CD3 to perform its best. Run it in a balanced system.