In the 500$ region you'll find plent of interesting DACs both new and used.
The NEW kid on the block is just a tick OVER your 500$ limit but is, to me, the most interesting of the lot.
The CA DACMagic PLUS has a number of interesting features including headphone output. The volume control can also be assigned to the audio outs...either balanced or unbalanced. This means for a dorm / desktop system of the HIGHEST calibre, you'd need a source, the DAC and some powered speakers. You could bring the whole thing home for 1600$, with a good pair of Grado SR60i 'cans'.
In the higher cost brackets of DAC, the choices are wacky. Rega? Bryston? NAD Masters? Bunches of others to suit.