Understanding the Wadia 170i Transport

Trying to understand this device and the benefits it can provide. Perhaps those who are using it, or have used it, can help. My questions are,

1) If the Wadia 170i unit itself has its own internal DAC, why is it necessary to use an external DAC to truly benefit its high rez digital output?

2) If using an external DAC, and in order to benefit its high rez digital signal, should it be connected only thru digital output (from external DAC) to the preamp, int-amp, or receiver? Or can it go analog RCA from external DAC to any of said components (using high quality IC's of course)?

2) If using only Wadia 170i's analog RCA output (without external DAC), is it the same as using a mass market iPod dock with analog RCA output? If not the same, is there really a superior sonic performance.

I'm interested only about the audio performance for lossless playback, not video. Thanks in advance.
The wadia i170 does not have a dac. It's only purpose is to bypass the dac in the ipod and send the digial signal to an outboard dac. The sound quality of the wadia i170 is dependent on the dac you use. The better the dac the better the sound you get. I have my wadia i170 greatnothern sound co. mod unit hooked up to my wadia 521 gns mod dac. The sound is pretty good about as good as mid-fi cd transport 1500 to 3000. It best to transfer your music in apples lossess.
Unless you have a nice outboard DAC you won't see much benefit from the Wadia i170. The only reason to get one is to be able to get high quality sound from an ipod. You must have a compatible ipod. Basically you need one of the newer ipods or it doesn't work well. I have a 5th gen ipod video and it works about half the time I try to use it and when it does you have no control over the ipod while it is docked to the Wadia. My iphone seems to work fine with the i170.
Just to add to your question 2, if you have a decent outboard DAC, you should connect anologue from the DAC to your pre or integrated amp. No need to connect from your DAC to your amp via digital.

As for Q3, if just using the Wadia anologue outputs this is the same as just docking your iPod in any other dock - using the iPods DAC and the sound is nothing special.

I use the Wadia to an Audio Note DAC and then anologue from the DAC to a Musical Fidelity integrated and the sound is as good as my Musical Fidelity CD player. I love the convenience of just parking the iPod and getting excellent sound with the flexibility of using my playlists.

Please see my review posted here on Audiogon on the Wadia dock. I fully agree with Usarmyvet and Ejlif that the quality of sound is wholly dependent on the DAC you use.
Thank you very much for sharing your observations and experiences. Hens, thanks for your insightful review. I now have an improved understanding of this device.