I would go with a Benchmark Dac 1 ($1,000 - $1,300 with or without usb input), of Bel Canto Dac3 if you can swing $2,500.
As for the digital processor issue, I'm a purist at heart. If CD is recorded with sibilance, etc., my system will reveal it and I haven't tried to make my system do anything than reveal the good (and, unfortunately, the bad). I'm a little out of my league here. I would listen to the problem recording on a high end cd player (and equivilent system) and see what you hear. I'm not one to try to color sound with an outboard processor. If the CD sounds good (or better) on the high end player, maybe a change in cables may help-not really sure. My point is that you need to ascertain if it's the disc, or your player/system. I have a CD with a bit of sibilence and on my Esoteric X03-SE, you hear it-it's there; on my squeezebox/benchmark, the sibilence is greatly reduced-you only hear it if you really try, and it is barely noticible. I don't think thats a plus for the benchmark--to me, it's just that the benchmark is not as revealing as the Esoteric. I'm sure there are others here with alot more experience than me about this.
As for the digital processor issue, I'm a purist at heart. If CD is recorded with sibilance, etc., my system will reveal it and I haven't tried to make my system do anything than reveal the good (and, unfortunately, the bad). I'm a little out of my league here. I would listen to the problem recording on a high end cd player (and equivilent system) and see what you hear. I'm not one to try to color sound with an outboard processor. If the CD sounds good (or better) on the high end player, maybe a change in cables may help-not really sure. My point is that you need to ascertain if it's the disc, or your player/system. I have a CD with a bit of sibilence and on my Esoteric X03-SE, you hear it-it's there; on my squeezebox/benchmark, the sibilence is greatly reduced-you only hear it if you really try, and it is barely noticible. I don't think thats a plus for the benchmark--to me, it's just that the benchmark is not as revealing as the Esoteric. I'm sure there are others here with alot more experience than me about this.