Uh oh, looks like this risks going from a DAC discussion to a cables one
As far as I can tell, the only cable worth spending more than $20-$30 on are analogue ones, particularly RCA interconnects. I tried a $6 cheapie vs the $130 ATC one that I bought, and the difference was night and day, most noticeable in terms of achieving clean, rather than bloated bass. I also listened to a $250 Chord interconnect, and the step-up was a lot smaller. That's all I needed to know really...
As far as DACs go, yes, they can make a big difference. I A/B tested the Chord Qutest ($1,900) vs the Audiolab M-DAC+ ($1,200). I went home with the Qutest. Or rather, I placed my order for it, which took a month, even here in the UK. I feel a lot happier spending $1900 on the Qutest than $1200 on the MDAC+, for the same reason people here spend thousands on nice speakers. The bass with the Qutest was SO clean, crisp, and as a result, punchy. The bass with the MDAC+ was bloated and nondescript. Also, the Qutest really brings out individual instruments so that you hear everything individually rather than as a confined mix, and for well-recorded tracks, this means that you really get a good feel of the composition coming together. The only downside right now is that I feel the Qutest is "lacking emotion" a bit, but this is probably more due to my current speaker and amp setup - a DAC shouldn't add a sonic signature. I'm getting new speakers shortly so I will reserve further judgement until then :

Are there cheaper alternatives to the Qutest that may be as good or better? Probably. But I'm confident that it will blow any DAC that's less than $500 or so out of the water.