Yes, experiment with a good quality DAC. Search on DAC threads for recommendations for your price range. For something very different, try a tube DAC. A very economical tube DAC is a used Cal Audio Lab Sigma I or II which can be had for $200-350 depending on the model, tubes, and if it has the upsample board (II Model). If you don't like it, you'll have no problems selling it. I began with a Sigma I paired with my Sony DVD 9000ES DVD/SACD player and it made a significant sonic change for my redbook CD. (On some CD, it's better than my $7K analoge section-TT, cartridge, phono-preamp, speed controller.) I upgraded to the Sigam II which gave me an additional 5-8% improvement. Both are good and I've kept them both in two different systems. Going this route could be cheaper than replacing your DVD player. If your DVD player has a second digital output (Coaxial and fiber optic), one can go into the A/V processor and the other into the DAC with its analog output back into another input (CD, AUX, etc..) on your A/V processor. Good luck and always remember to enjoy the music.
To dac or not to dac
Currently i am using a marantz dv 7600 universal player for my two channel needs, I really like its ability to play all formats such as sacd and dvd audio. Although, since its a dvd player I would like a stand alone cd player, I thought about moving up to the 8001 for cd playback only but that would require selling the 7600 and thereby losing the format flexibility, although I could still play sacds. I than thought about using a beresford dac which go for under 200 bucks. My dealer using one at home and he says it makes his universal player sound like a 2000 dollar stand alone player, he suggested getting it. This was very influential for me because he does not sell the beresford, therefore he would get no commission and he is no way related to the company. He must really think its a great piece. What would you do?