RUNNING POWERED SPEAKERS FROM AN IMAC

Good, yes, it does seem as if you've isolated the problem to the Radio Shack cable. If you want to be sure that's the issue it might be worth it try a different cable, such as this one. The Monoprice cables are of excellent quality at reasonable prices and they ship the same day you order.

An external DAC would be the next step up and while I don't have any experience with the Dragonfly since I've always used the optical output on Macs, it has a great reputation.

Well got the new cable from Monoprice - it looks and feels more substantial than the Radio Shack one - unfortunately, the static is still there! Very frustrating.
On a happier note, got the latest version of the Audioquest Dragonfly and am really liking this. When you play music, the static is not really noticeable which is nice. Once you start scrolling the internet, static is back...

By the way is there a way to use the Dragonfly with headphones and iPhone at all? Seems I read that the iPhone doesn't have enough power, but using a powered hub would do the trick - anyone do this?

Thanks for all your help on this folks.

Audiowoman,
I'm happy to hear you like the Audioquest Dragonfly.
Why don't you phone the place you purchased it from and let them advise you regarding your questions above? I'll bet they get those questions all the time.

I recommend you try Audirvana Plus playback software, made specifically for the Mac. You can try it for free for a couple of weeks. Learn how to use it to turn off other computer functions that compete with the music playback, and dedicate some RAM to buffer the music stream. This may reduce or eliminate the clicking and give you an overall better sound.

You will probably feed a cleaner data stream to your Dragonfly via USB with this, and even a Nirvana-decoded analog feed direct from the computer will sound better than iTunes on its own.

i bet your speakers aren't shielded. try moving them away from the imac.