Best DAC for my system?

In the $500 dollar range I probably would be looking for a used Schitt Bifrost.
Saw where they had one over at TMR.
In terms of something new, your options at this price point in my opinion are much more limited. Could take a look at Pro-Ject’s Pre Box S2 Digital which retails for $399.

Have you every heard of Topping DACs? I hadn’t either, but the brand is a favorite of an audio forum that believes in OBJECTIVE test results. Topping has a line of sub-$300 DACs many sub-$200 that in the test results there are state of the art.
https://www.audiosciencereview.com/forum/index.php

Fair warning. I don’t agree with their slant on things. They call folks like me "subjectiveists" because I go by sound quality and not blind devotion to objective test results. But who knows, the test results of the Topping DACs are very good.

I had the Pro-Ject’s Pre Box S2 Digital DAC for a while and it wasn’t bad. I also had a Schiit Modi Multibit that I licked. But I have a Chord Qutest DAC now and love, love, love it. Unfortunately, it’s $1800 so above your budget.

PS. The Bluesound Node2 can be bettered - but get a dedicated DAC first.

I'll second the recommendation of the Pro-Ject Pre Box S2 Digital. I have one in my office and think it's exceptional for the $399 price. I've compared it to the Bel Canto DAC 3 in my main system and it's close. It's also a very good preamp and headphone amp and won an EISA Best Product of the Year award for 2017-2018.

Yes, spend more.
No. not a fortune.
$1,200 will do it.
Buy used.

Benchmark 2 or 3.
Chord Qutest

Worth it.