Can good speakers take edge off digital?

You have your answer, your analog doesn't have this problem, the DAC is your problem. You can either tweak, mod or get a new DAC. At $1k it may be impossible to get both resolution and smoothness, I think you have to go to a higher price point to get both. If you are handy with a soldering iron, or hire a tech you could mod your DAC to smooth out the edginess. Some tweaks, those mentioned above could also be all you need.

Toufu,

My first recommendation would be the best Audio Note DAC you can afford; 2nd would be Wavelength or MHDT (which are astoundingly good for the money).

I kind of figured it was my digital source, but isn't Monarchy NM24 one of the better digital sources? I just don't want to go spend a few grand on a player or dac and find out that it stll can't beat my $1000 turntable (Music Hall 5.1 with Goldring 1042).

Steakster and Bob are absolutely correct, clean power and a good power cord can make all the difference. Clean power and a nice power cord can make less than state of the art digital reach far above it's station. I would also investigate having the Monarchy modded, some nice capacitors, resistors and op amps go a long way, and much less expensive than a new DAC. Go with the power conditoner and cord first, I bet you'll be surprised.

I also use an 845 amp, using an 845 amp with those speakers should give you first rate sonics. Your preamp will also benefit from power conditioning. And then there are dedicated AC and isolation to think about, I know, it never ends!