Is it the transport or DAC that enables HDCD/Red?


Good morning all,
I am new to transports and seperate DAC's. I recently purchased a Parasound CBD 2000 Belt Drive Transport and am looking to buy a DAC.

However, I am not sure what signal the transport is to provide in order for me to play HDCD as well as Redbook CD's. Should I expect the transport to provide the HDCD and Redbook signal or does the DAC do all the work?

Does balanced in/outputs produce a better sound than does regular RCA in/outputs?

Right now I am looking for a compact DAC (the smaller the better) that offers good to excellent sound for not a lot of money. I listen to classical (choral/orchestral) and jazz music. I love the human voice and large scale orchestral and choral works.

What shoud I be looking for since this is all a mystery to me at this point. I am just being honest. I really don't know what's happening in this area. By the way, I would be pleased if you would offer some of your choices please.

Finally, I am reading more so that I can learn more. Thanks so much for your understanding and input. Have a great and wonderful day and weekend.
rbwinterlink
Ghostrider45 - All CDs are made from higher number of bits from master tapes thru decimation to 16bit/44.1kHz. Bit nr 16 (LSB) switches dynamic range of the other bits but it cannot play well on redbook CD player since it has no way of knowing what is playing and will play with weird dynamics.

Whole scheme assumes that in loud passages you can't hear resolution of quiet instruments. Theoretically it supposed to work but I read opinion of recording engineer that it sounds a little strange.

Photon46 - I don't have HDCD player and asked if anybody listen on the same unit to exactly same issue of, for instance, Doors that you mentioned, in CD and HDCD.
When it says that older disk was remastered for HDCD sound in general could be improved. It's like comparing regular and remastered Doors album.
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Bob - do you have ability to play HDCD in non-HDCD mode (redbook)? How does it sound?

You can probably guess my intentions - I'm trying to find what killed the standard (it's dead - isn't it?).
Kinjanki:
Actually the HDCD process has improved since I last looked at it years ago, and my memory was wrong - it produces a 20, not 18 bit datastream. Again it is much more than a simple dynamic range switch. See:

http://mixonline.com/mag/audio_pacific_microsonics_hdcd/