Need Balanced DAC with optical and coaxial inputs for 2 channel home theater system

As you have already seen, you're going to get lots of opinions and recommendations. Honestly, there are so many good sounding DACs out there, you're just going to have to narrow it down based on reviews and take a leap of faith, or buy something new from a dealer who has a trial period. 

That said, I will add one more suggestion to the mix: I recently switched from a Parasound ZDAC (which I liked a lot) to a PerfectWave DAC II,  which I absolutely love. I am running it straight into my amp (Parasound Halo A21) and it sounds wonderful. Good luck! 
-Jon

I'll recommend one more: the Wyred 4 Sound DAC-1 LE with the Femto clock and super cap upgrade options.  At $1,274, it is much less expensive than the DAC-2 DSD SE, but is very similar; no remote option and has a different display.  I do have this and think it is very good, but to be fair, I have not heard the DAC-2 SE.

Thanks again for al the above suggestions.  I have added the Resonessence Labs Veritas DAC to my list ($2,850).  Resonessence Labs latest Audio DAC product, VERITAS, will start shipping shortly.  The Veritas DAC includes the new ES9028PRO series chip.  The VERITAS DAC includes USB Audio 2.0, DSD and DXD, XLR outputs, RCA outputs, Optical input, etc.  The exact specifications are expected to be posted to their web site soon (maybe at the end of the month).

I am going to THE Show in Newport Beach (June 3-5) and hope to audition various DAC's to help me make the right decision.  In any case, I will borrow a DAC to use in my home system to ensure I make the right decision.  Thanks again.

At THE Show I discovered Prism Sound.  This was the first time I heard of this British company.  I listened to their Callia DAC every day, enjoyed the sound quality and asked them many, many questions.  They were very helpful and answered every question I asked, in detail.  The Callia DAC is fully balanced and includes USB, optical and coaxial inputs.   It also has XLR outputs for connecting to my Ayre AX-7e Integrated Amplifier.  The Callia DAC also has a volume control and a 2nd volume control for a headphone.   Please see:

http://www.prismsound.com/hifi/products_subs/dac1/dac1_home.php

http://www.prismsound.com/hifi/products_subs/dac1/dac1_spec.php

I was very impressed with musical sound quality and also the people from Prism Sound.  I ordered the Prism Sound Callia DAC and it is expected in three weeks (estimated).   

Some of these DAC's mentioned above were not brought to the show, or were damaged in shipment or I did not like their presentations.   I wanted a DAC from a strong, experienced company that would support me and their products.   Of course, the main thing is the DAC had to sound excellent and have the input connections I needed.   These are some of the reasons why I purchased the Prism Sound Callia DAC.   Thanks again for all your suggestions above.

My Prism Sound Callia DAC arrived and installed perfectly.  I had a couple of operational questions and Prism Sound Customer Support answered them very quickly.  The Callia DAC sounds very good but, yes, it needs more burn in time before I can comment. Please see:

http://www.prismsound.com/hifi/products_subs/dac1/dac1_home.php

The Callia includes a volume control for direct input to a power amplifier. Unfortunately, I cannot use this since I need to control my volume using my TIVo remote. My Callia DAC is running balanced into my Ayre AX-7e integrated amplifier.  My sources are my TiVo cable box and Sony Blu-ray player.   The Callia DAC is small (285x242x50mm including feet) and is a very nice looking unit.

The Callia DAC comes with a Quick Start Guide and the Operation Manual is on the USB that is delivered with the unit. The stick contains the manual and a software tool that will enable you to load firmware updates in future. You need not install the firmware loader tool until you need it, but you should take care not to lose the stick. It will also be possible to download the loader tool from the website. There are no updates as yet. The Operation Manual is excellent and I strongly suggest you read it. It contains useful information when you plan on using a PC or MAC computer.

For standby mode, press and hold the button on the right for about 5 seconds then release. Since I am using the volume control on my Ayre AX-7e integrated amplifier, I wanted the Callia DAC volume control disabled. This means you set the DIP switch #1 to “OFF” (Up) on the back of the unit. This is very easy to do (use a paper clip) and worked fine.

My unit is set to the automatic mode and defaults to the incoming signal. In automatic source selection mode (indicated by the 'Auto' LED being lit), sources are selected automatically according to sensing of valid audio at the inputs. In automatic mode, the current source remains selected until it is silent (or otherwise absent) for more than four seconds whilst another input is playing - in that case the other input is selected. The four second delay is to prevent spurious switching during silences between tracks.  If needed, you can also set the input direct to the source (bypass automatic mode selection).

The Prism Sound Callia DAC is sold direct from Prism Sound. I have owned the Callia DAC for one day and already like it very much. It is very easy to use and their customer service is excellent. My Callia DAC needs more time to break in but it does sound very good and I recommended you give it a listen.