What the benifit of using a separate dac?

Hi, I have a Sim Audio Moon Exclipse Cd Player, my question is what's the benifit of using a separate DAC, when do you know that your player is out dated to the point that you need to upgrade or are you better to use a external dac.Using the digital out put of the cd player are you by passing all internal clock and dac's etc, then the player becomes just a transport? Is there is a benifit to be gained by doing this, what sort of dac would you look for, what the differance between the better brands? I currently have Pass labs X1 pre and x350.5 power, mit 3.1 speaker cables, 2.2 interconnects and Talon firebird speaker, Iam only interested in red book, would be great if any body could shed some light on this subject for me.