Do I need a DAC?

Oscarrr, DAC will give you cleaner sound. You might not care but noise embedded in music will screw up other things like for instance imaging. Noise on analog side is caused by the jitter on digital side and is detectable by lack of clarity only (since it is proportional to sound level). Your AE, according to Stereophile measurements, has decent/average jitter (258ps) on digital out but really bad jitter artifact on analog out, equivalent to 2.4ns - almost 10x worse. Read this: http://www.stereophile.com/digitalprocessors/505apple/index.html

Even with 258ps jitter you would be better off to place reclocker between AE and the DAC. AFAIK jitter becomes inaudible below 50ps (peak-peak) but it is a matter of individual hearing. Studio engineer or symphony orchestra musician would be more likely to detect lack of clarity.

Format cannot make any difference as long as it is lossless (bit perfect). Information is transferred as data in packets over Wi-Fi without timing. Timing (clock) is recreated in AE. If you ever decide to use lossless then perhaps the best format is ALAC since Itunes uses it to transfer data to AE, otherwise it has to compress to ALAC - additional operation but it doesn't make any difference because your computer is fast enough anyway (ALAC saves you disk space). I use jitter suppressing Benchmark DAC1 with AE but sound of Benchmark might be not to you liking (neutral and not warm). Combination is as clean as it gets.

I have to warn you that since clock is recreated in AE, without music clock drops. As a result of that some DACs "eat" beginning of each song with AE. Remedy is to use "crossfade" in Itunes. My Benchmark DAC1 is fast enough to sync again but you might scan this forum to find out if the problem exists with particular DAC that you have in mind before investing money.

>256kbps is very good and you'll notice big difference with DAC. Additional reclocker should give you a little more, even with 256kbps.