Using Airport Express/AirTunes.

Streaming either wired or wirelessly from a Mac to the Airport Express, then via the optical mini-Toslink jack on the AE to an optical input on a DAC works very well.

That does, indeed, bypass the internal DAC of the AE and there is no impact on Apple Lossless files.

The usual recommendation is to use a glass Toslink cable, I have one I bought from an audiogon member who no longer sells them here but there are other sources, I've seen the Sonicwave cables sold on Amazon recommended highly.

If you're going to stream wirelessly it's definitely worth ensuring that both the Mac you use and the Airport Express you get have 802.11n capability, rather than the older 802.11g standard. Newer ones all do and that helps ensure you won't have interference issues.

Kijanki - yes, I had problems with interference from a microwave oven when I first put in an older Airport Express but was able to fix it in that case by switching channels from within the Airport Express utility application.

If I remember correctly the default channel on installation is 6 but changing it to 11 solved the problem with my particular setup.

My experience with the Airport Express and a DAC has been better than Jax2's. Comparing the output from the AE with the same music played from the original CD using a transport and the same DAC there's very little, if any, audible difference to me.

I have never tried a Squeezebox Touch, however, so I can't comment on whether it might be a better solution for you and I don't yet have any high-rez audio files so that's not an issue at the moment.

Thanks, Kijanki. I've had the same experience of not hearing a difference between the AE compared to several different DVD players used as transports.

I have used the AE with several DAC's, including the first version of the Benchmark, and the DAC's do sound quite different from each other. In each case, though, the transport and the AE sounded essentially identical, as far as my ears could tell.