Konky, check my system and you'll see what I'm using. Yes there are some really expensive DACs around--some expensive transports too--but never mind them. Lots of folks are very happy at the $1K level, less if you buy second-hand. I'm thinking of Apogee, Benchmark, Bel Canto. Tweak them with an isolation transformer or battery power, antivibration footers and a premium digital cable 1.5 meters long... see what you get.
A good transport at that price level is a bit harder to find. Some like TEAC VRDS, some like the Pioneer stable platter mechanism, some like CEC. For $500 - $1K you would have to buy used, and they are likely to be older units.