Just got a new Bluesound Node. Very disappointed!

OP,

While the Bluesound is a budget streamer… what you describe does not sound right. Have you tried alternative connections? It has 4 different outputs… I would try an alternative. Something wrong with the interconnect.

Airplay is not even remotely at the same level of performance.

I have to agree, I think you got a defective unit. 

OP,

”I always assumed to use it as a transport for the digital signal from the BNS and never use it’s internal DAC. So as long as the data file is “true” shouldn’t the SQ be determined by my outboard DAC?”

That is a very logical assumption… but just not true. I have used many streamers from iPhones, MACs, through $3K, $5K an finally I own a $22K Aurender flagship steamer… each step provided better sound (you must have a DAC up to the task of course). My Aurender is simply stunning and brought my digital end to the level of performance to the high end analog side of the system.

I also have an Aurender N100 in my headphone system. You can see my systems under my UserID. 

I highly recommend looking at an Aurender streamer… they come at many price levels. They only make streamers and many of the best.

Glad to hear you figured it out. I agree with @oddiofyl… moving up in streamers will really help. I recommend Aurender… as high a level as you can afford. They are really natural sounding and get better and better in no small increment moving up their offering.