is there a current production 20 bit cd player ?

It's not current production, but an excellent 20-bit player was the Denon DCD-1650AR, released in 2001, MSRP $1,800. I've owned two and still have one. While it's no longer my reference player, it's a very fine one, very well made, built like the proverbial battleship, weight 26 pounds 4 ounces! You can pick up a used one at a very reasonable price. (It does have 8X oversampling.)

NAD C-521BEE is 20-bit machine also.

Can anyone tell me what a 20 bit D/A does when presented with 16 bit data?

With oversampling a 16 bit D/A can output discrete levels corresponding to a 20 Bit D/A. That must be what is going on.

In any D/A the least significant bit, and sometimes two, usually toggles randomly from a one to a zero. If you use a 20 or 24 bit D/A to process 16 bit data, at least you can be sure that bit 16 is out of the noise level. For example, you could zero out bits 17-24, and essentially have a noise free 16 bit converter.

Oversampling came into the audio field with the first Phillips CD players. They used a superior quality 14 bit D/A with 4X oversampling whereas Sony used a true 16 bit converter that was less than perfect. The Phillips players sounded much better than the Sonys, but the part that really makes me chuckle is that Phillips, who was in partnership with Sony on the CD development, never bothered to tell Sony what they were doing until it was too late for Sony to react.

Maybe I'm off base here, but why go to 20 bit instead of sticking to Redbook. In fact, if you like Audio Note, why not one of their non-os DACs. You can use your CD2 as a transport, or get another transport. Just thought I'd throw it out there.