Pros & Cons of Buying an Integrated with Built-in DAC?

If there's no demand on higher power, the combination units similar to vintage receivers will work great depending on unit quality.
Many vintage receivers tuner/preamp/amp combos compete very well against modern full function integrated amps

I agree with ADG - get the best sounding integrated amp you can, and then add a separate DAC.

I've been using a Meridian 263, from about 1992, and it is still very good musically/sonically.  The downside is that it won't work with any newer formats, but since it was effectively free I don't really care. 

Good, inexpensive DACs are all around these days.  Don't limit yourself by trying to put everything in one box unless you really have to. 

Very happy with Hegel H80 in second system. In five years I will either sell it or buy an external DAC.  Easy either way.

If simplicity and convenience matter along with good sound, there are some very good choices available out there.

I bought a BelCanto C5i (true digital amp with DAC and phono) as an experiment to test the downsizing option in my second system and gotta say this unit is absolute top notch and competes well with separates.

60 w/ch is really its only limitation but if very high volumes out of less efficient speakers is not required, you are golden.

I agree with the above posts that you should buy the best possible sounding integrated amplifier that matches your needs and purchase a separate DAC.  Based on current market conditions, it seems, that DAC technology is constantly being upgraded (mostly new chips) while amplifier design, generally speaking, changes less frequently.  

I suggest you separate these two functions so that you have the option to upgrade either the amplifier, or the DAC, as your system and interest requires.  The separation of the amplifier and the DAC into two boxes maybe more expensive but will be worth it, in the long run, when you decide to upgrade.  There are many separate quality DAC's on the market today in many different price ranges that should work for you.  The separation of the amplifier and the DAC will give you the most audio system "flexibility" for future system upgrades and improvements.