N00b, recomendations... cheap, good DAC w/ S/PDIF

Hello all,

First post on Audiogon and Im hoping some of you audiophiles out there can help me. I am just getting into the audiophile thing and dont have the killobucks some have to drop on a system so I piece my system one step at a time.

Currently I am in the market for a good, cheap DAC.

My system consists of a couple Magnepan MMG's, a Mitsubishi DA-A10 amp, and will be purchasing an Emotiva Preamp.

I would like to set up my system to stream music from a central server being fed to my Hacked XBOX w/ XBMC. Using optical out feed that to my system. This will allow me to use an internet tablet to control the system through XBMC's web interface.

The DAC's I have been looking at are extremely expensive and I am hoping some of you will have some recommendations on a DAC that wont cost me +$1k, ideally Id like to keep it at $500 or less, but $1k is my tipping point.

What I need:
Good quality sound
S/PDIF input

I would prefer any system that offers XLR Output and USB input as well, but those are not necessities.

Any opinions or help would be greatly appreciated.