Theoretically, given the same complete DAC circuit (not just the same DAC chip, but also the same the same power supply and analog output circuit), the CD player with internal DAC has the advantage of a direct I2S connection from the transport to the DAC without the possible inherent problems of S/PDIF conversion and electrical differences in S/PDIF cable length (associated with signal reflections) and impedances.
I don't have too much personal experience with all in one CD players versus using a CD player or DVD player with an external DAC, as by the time I bought and experimented with external DACs, I was fully into computer audio and haven't spun a disc in many years.
But others who have experimented substantially do report differences in transports used with the same external DAC. The differences in error correction as well as the S/PDIF conversion and inherent jitter might explain some of these sonic differences. In my own limited experience, I was fairly certain I preferred using a CD only player over an inexpensive DVD player as a transport. The laser pickup in a CD player is optimized for the depth of pits on a CD disk. That is why some of the more expensive universal players actually had two lasers, one with a wavelength specific to CDs and the other ..... for everything else.
Steve
