Go with a DAC paired with your NAD CDP. The first CDP that I had in my big rig was a Naim CDX. I then moved on to a Doge 6 tube CDP. Both players, however, were smoked by the combination of an Oppo DV-980h ($179) paired with a vintage California Audio Labs Sigma tube DAC. I paid $250 for the Sigma. I sold my CDP and bought a small secondary system for my dining room with the savings. The old Sigmas are great, you will notice that when they come up for sale here on A'gon they are sold within moments of listing, they are that good. Plus I run my Direct TV into my Sigma via an optical cable, and can switch back and forth via a small button on the Sigma.
New CDP or new DAC?
One of the weak links in my system is my NAD C542 CDP, which when I bought it was a recommended budget CDP. In the new Stereophile Sam Tellig was extremely taken with the Music Fidelity M1DAC. So the question which occurred to me was whether it would be better to buy a new, better CDP, or to use my existing CDP as a transport and feed the signal to a new DAC instead (i.e. assume that, for example, the M1DAC is significantly better than the NAD's internal DAC). Also, if the recommendation is to go the DAC route, the NAD would let me use either a coax or optical cable to connect to the DAC - any preferences? So, I guess I have two questions: CDP or DAC, and if DAC, which connection path to the DAC? Thanks in advance for your suggestions.