Preferred Audio Output, USB or 3.5mm?

The USB output to your DAC (assuming it is a USB DAC with good implementation) is going to be galaxy away (superior than) running audio via the headphone jack out of your iMac. I have not heard of a DAC that runs from the 3.5mm headphone jack though. You might be confusing this with a different connection. To run your computer via a DAC the typical connections would be USB, or SPDIF (either RCA, BNC or Toslink). The 3.5mm headphone jack carries an analog signal (not a very desirable one either), and would not work via a DAC.

Ah, forgot about the mini-Toslink via the headphone port. I haven't actually tried that except for with an Airport Express and it was absolutely terrible. But that is a different device. In that case it will depend upon the implementation of the USB with the DAC you are using. If the DAC has poor USB implementation you might try using a DIP/dejitter interface which can go between either USB or Toslink, but would require an additional cable. I don't have any experience with you DAC to say whether any of this would be worth it. If it sounds good to you, that's really what's important.