Accept free Audiophilleo 1 and upgrade DAC?

First post!...and unfortunately, it's painfully similar to a string of Sangbro's recent threads, but I'm looking for guidance with a specific situation.

Two questions, but first, here's the digital part of my system. Microsoft Surface (running Roon as core and end point) > AudioQuest Dragonfly Red > Rogue Audio Sphinx v3 > Zu Audio Omen Mk 1. 

Question 1: A friend recently gave me an Audiophilleo 1 (w/ Pure Power) USB to S/PIDF converter. Given what I've read on this forum and my current system, it seems like a standalone DAC upgrade should be prioritized first rather than looking for a streaming DAC if I have $1,000 to spend. So, I'm leaning towards inserting the Audiophilleo and then finding a new DAC instead of getting a dedicated streaming DAC (e.g., Bluesound Node 2i, Cambridge CXN, Pro-Ject Stream Box). Is this what you would do if you had my system?

Question 2: What recommendations do you have for a new or used DAC for $< 1,000? It seems like a Denafrips Ares II gets good reviews. I don't really have a grasp of what "used" DACs I might keep a look out for that dips into my price range.

Thanks,