Basic Question: What is Needed to use a DAC?

For the computer, get a Hag USB/SPDIF converter which will allow you to go USB out (of the computer) into the Hag usb then SPDIF (conventional digital cable) out to the SPDIF port of a DAC. Then RCA out of the DAC into your Pre Amp.

There are more complicated and expensive ways to go but this will get you started without much effort and sound good too.
The Hagerman USB converter cost around $100.

Check out how to set up the computer at Wavelength's Audio USB DAC website(www.usbdacs.com).

If you want to be really cool, set this up on ITunes (pc or apple computer) and use an Iphone for your remote. It will have album art, playlists, volume control, web radio, etc..

Use the digital out. Optical cables are mostly plastic and inferior to the metal
cable you'd use on the digital out. If you can find a glass optical cable, though,
that might be worth a try.

I want to use my Sony DVP-NS77H as my CD transport. It has a Digital out and an Optical jack in the back. Which one would be better suited for a DAC, Thanks.

Your CD player needs to have a digital output on the back panel. Usually this is a single RCA jack.

You unplug your CD player's left and right analog output cables and plug them into the DAC's analog outputs instead. Then you connect your player to the DAC's input using that back panel output jack and the DAC's digital input jack. For this connection you need a single cable made expressly for a digital signal, and in the great majority of cases it should be 1.5 meters long for the best sound.

Other devices... well, if you can unplug the stock power cord on your player and substitute a better one, that will improve the sound. Same goes for the DAC. You don't have to do it, though, the setup will still work OK without. You can put your player and DAC up on antivibration footers too. All CD players I have known benefit from this.

To use a dac, the playback device must have a 'digital out'. For your PC, you can use a USB port for digital out, but the dac must have a USB input - increasingly popular among newer dacs.