840C as a DAC. What do I need

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Your computer would be better because you can simply use the digital out from it into the DAC and then anything on the computer can be played back. You can even download some hi resolution stuff and use it with the DAC. To play back the iPod simply get a mini plug to RCA adapter and plug it in to the sound system or get an iPod dock which is better because it keeps the player charged.

I just did a Google search on the Pure i-20 mentioned above, and it looks like it might be just the ticket. I'll likely be getting one myself. It has an internal DAC of its own that outputs in 24-bit 192 KHz, as well as digial outputs that bypass it's own DAC so you can run it into your 840C. HiFi Choice gave it a great 5 Star review and What HiFi rated it 4 stars with highly favourable review as well. Here's a link to the manufacturer's site and a discussion thread:

http://store.pure.com/store/pure/en_US/pd/productID.221628800

http://www.head-fi.org/forum/thread/529956/pure-i-20-ipod-iphone-dock-as-a-dac

The Pure looks good but it can't make an iPod sound much better if the files aren't high resolution.

If you want better sound than plugging the Ipod into your preamp with RCA (and therefore use the Ipod's dac), try the Wadia iTransport. It takes digital out from the Ipod, and converts it to SPDIF RCA which you can then plug in your cambridge audio.

http://www.musicdirect.com/product/82178

Arguably you can get better sound out of your PC directly... but the cost and especially the complexity to do it right are much higher.