If you have an iPod perhaps you have a Macintosh computer, and if so, you can encode your music with Apple Lossless and then send it from the Mac to an AirPort Express (this has the added advantage of keeping your moving hardware and fans in another room if you like). The AirPort has a toslink digitial out that you can send to a DAC (it also has an analogue out but I find the sound from that disappointing).
Having said that, I agree with the thought that your iPod running lossless-encoded music should be good for most needs (Stereophile class C).
Having said that, I agree with the thought that your iPod running lossless-encoded music should be good for most needs (Stereophile class C).