OP asked, "How do bigger external power supplies improve source components?"
By reducing "noise" . Lowering the noise floor makes for a darker background allowing things to sound clearer. External power supplies are always linear and will transform AC to the needed DC voltage for the component. Lower level components (like your Node) will use an internal Switch Mode Power supply which are inexpensive but inherently noisy. Better components will go the more costly route and have an internal Liner Power Supply that reduces the noise floor. The best flagship components will separate the LPS into another chassis to get the noise floor as low as possible. This is why you see many flagship components in the multi box configuration. They have separated their LPS section.