I have a 16'x16'x10' office where I spend a good deal of time throughout the day and I'm looking for a great sounding solution for listening to digital music either from my PC or iDevices. About 70+% of the audio on my PC is lossless (flac) and the rest MP3. I also listen to Pandora One quite a bit. This will be a 2 channel system with the possibility of a subwoofer later if needed.
From everything I am reading, I will need an external DAC to connect my PC using either a USB or Toslink connection. Anything iPhone or iPad related can be streamed to the DAC via an Airport express which I already have. Physical space is somewhat of an issue. What I DO NOT want is a full-size AV receiver. Ideally, I would like something no larger than the footprint of an iPad if possible.
My original thoughts were to set a budget and start searching for a nice set of bookshelf speakers first before an amp/DAC. Then I started looking at DACs with integrated amplifiers vs. an external DAC and the purchase of a separate amplifier vs. an external DAC and a pair of active speakers. It seems there are lot of external DACs (without an amplifier) on the market, similar in price, and I'm getting overwhelmed wondering where most of the money should be spent. Whatever I purchase I'm looking at keeping for at least the next five years.
The more I read the more I'm asking questions such as: 1.) Will an expensive DAC really do much to improve the sound quality of Pandora One or lossy MP3's? I'm figuring up-sampling may not necessarily produce great results if the input signal is compressed.2.) Would it make more sense to purchase a set of active speakers with a built-in amplifier sized specifically for the speakers? Or would that just limit my choices of speakers which is the most important component in a hi-fi setup? 3.) What things might I be overlooking?
Go ahead, school me. Any recommendations? My original budget started around $1200, but that is flexible. Thanks in advance.