Best PC and DAC Combo $700-ish

Right now, I have a Dell PC with a mediocre sound card hooked up to a Klipsch 2.1 speaker system. It sounds, you know...fine.

But recently, I've been reading a lot about DACs that are specific to PC's (Icon, Foobar, etc.) and newer speaker systems that could yield better sound.

I don't *need* a subwoofer, but I like the idea of the music at least getting down into the 35 Hz range, so that most likely includes a sub.

Can someone suggest a combination DAC/speaker setup that would work well with iTunes (Apple Lossless for virtually all 5,000 songs).

Thanks!