"Steve, when one is using the Northstar transport, it is necessary to use a DAC with I2S input to get the best results.?"
It will outperform all S/PDIF transports using I2S after it is modded. That is probably enough motivation to use I2S.
"What do you think of balanced digital connections?"
They can be better than some stock S/PDIF interfaces. Depends entirely on the input circuit in the DAC. Some convert immediately to single-ended, so there is no benefit at all for the AES/EBU over the S/PDIF. Once I mod the S/PDIF interface, it is just as good as the AES. Usually, if both interfaces are designed correctly, the AES will sound better due to the common-mode rejection. Still not as good as an I2S interface though.
Steve N.