I second much of what has been said above. I recently compared several CD players, all around $2k (used or new, depending). From the group, I found both the Electrocompaniet EMC 1-UP, and the Audio Aero Prima to be the best. They are both excellent machines, and, coincidentally, I have one of each for sale right now here on Audiogon! The only reason that I am selling both, is that I have found a modified version of the EMC which I am keeping.
Now, as to the original question, I can't imagine a dedicated player at around $1k competing with either of the above-mentioned players. And I firmly believe that the difference, if one could quantify it, would be much more than 5%. I do, however, believe that above (around) the $2k mark, the returns (for those of us who are not wealthy) begin to diminish rapidly.
Finally, I also agree that the future of digital sources is computer-based, as Matt has suggested above. I have no doubt that some very good systems can be built right now, but I've decided to wait a while for that technology to further mature.