DAC vs. New CDP


I've just started looking into what DAC's really are. And I now have a question that I would like some opinions on. I've heard that DAC's can make a CDP sound great, but what if, for a few more dollars, I just got a new (or very nice used) CDP with the very latest DACs already inside?
I have a Classe .5 CDP, about seven years old. I know it doesn't have the modern DACs in it so I would think it's sound isn't as good as it could be. I'm wondering if I should look at a DAC to help the sound (CDP only has a AES/EBU output) or purchase a new or newer CDP. I've been looking at the Cambridge 840, Krell 280, Sim Audio, Bryston & Classe, all in the $1,500 to $2,000 range new or used. I know that the Benchmark DAC will cost around $1,200 new. Very few less expensive DAC's have an AES/EBU output.

My system is: Krell KAV 2250 amp, Krell KAV 280 pre, MF phone amp & headphone amp, Rega P1, Paradigm Studio 60, Kimber and RSCables.

Thanks for any input, ideas or experiences !

Jim
fritter5
Kijanki and Swanny - Thanks for your thoughts on this.

Given this line of thinking, maybe it makes sense to get an inexpensive CD player with good controls/UI and little regards to its sound quality, and put the majority of the money into a DAC.

I've got to address my digital playback at some point, so maybe this would be the best approach...

So, maybe the topic for another thread - "What CD players available for under $500 on A'gon have the best build quality, controls, and interfaces?"
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Thanks to everyone for your responses to my question. As I imagined, I now know more about DAC's but ultimately have to make a decision (as we all do) about whether the change brought about by the DAC is worth the effort and the $'s. In this case my CDP is just getting back from Classe for a check-up. I've been told (as I already have known) that this CDP has a very good DAC. Since I'm not into change for change sake with this hobby, I'm going to keep just the Classe and enjoy it's sound on my system, until I feel I want a different type of sound.

This was my first question on Audiogon so I really appreciate so many great thoughts and ideas.

Thanks, Jim
Biggest improvement you can make is to isolate & condition the AC feeding your cdp; feel free to ask for details. How's the AC to your preamp? Same story-double up & be amazed. Good luck
I've been trying to make up my mind on this subject myself. I've decided to go with something like a Cambridge Audio 340/540 used. I think I can go this route relatively cheap. I want a dac to run my computer through during parties and what-not. According to their website, a DacMagic and a 340/540 is near equavilent to a 740. Then I can take my Marantz cd5001 and put in my bedroom with my 2226 receiver as a small second system. I know there are better dacs out there, but in comparison to my current system I think this Cambridge Audio pairing should fit nicely.