best SQ improvement DAC under $1000 to pair with Bluesound Node 2i

Used benchmark. 

Denafrips!

Get this and sell your Node and you're well under $1K.  

TEAC NT-505-B USB DAC Network Preamplifier, Black | eBay

I have no affiliation with the seller.

MHDT  nice  analogue sound

No longer new, but I was a big fan of the Parasound ZDAC

+1 Border Patrol. It’s sound is more organic, 

CA DAC Magic

Dunno. Went from $250 to $500 to $3500.  Good luck.

Be aware that remote control is an issue.

Based on your desired attributes, I think a Denafrips Ares II DAC will be ideal.

A British Audiophile -- Denafrips Ares II Review

I’d recommend the Musician Pegasus R2R DAC.  It’s $1099 but worth the stretch if you can.  Here’s a review in case it helps...

https://soundnews.net/sources/dacs/musician-audio-pegasus-r2r-dac-review/

I paired my Node2i with a Border Patrol DAC (tube rectified) and it has delivered exactly what you described above.  Musical, great soundstaging and separation, easy to listen to. Base price is $1,075, so a slight reach over budget.

I’ve been more than satisfied, bordering on thrilled. 

My goal for adding an external DAC  is  open soundstage, better melodical definition and clearer instrumentation separation. Not necessarily clinical but more toward tube sound.

At a friend’s recommendation I got a Schiit Gungnir Multi bit and it is a very nice sounding DAC. Clear but musical.  I felt it was an improvement over a RME dac I had before that.

What improvements and sound characteristics are you looking for?