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
While we're letting it ALL hang out ;-) I thought I'd mention the JVC XRCD. USA operations now being handled by Elusive Disc:
http://www.elusivedisc.com/products.asp?dept=859
I have purchased a number of these (at CES's) and found the reproduction to be really amazing - especially the remasters of some great older recordings, like the Reiner/Bartok 'Concerto for Orchestra'. They can be played on any Redbook playback system.

I'm not as versed in digital audio technology as you folks, but I am able to understand the process in concept, and it does seem unique.
.
My Friends,
Thanks for you gracious comments and advice. I am most appreciative. As you can see, most of this is new to me. I had no idea what a DAC was until I was forced to start doing research after the purchase of the Parasound 2000 transport.

My basic knowledge told me that a belt drive transport should provide sound similar to a turntable with this same feature. Of course I was then forced to look at how to get the sound from the transport to the pre-amp, power amp and then speakers. It was then that the term DAC came up.

Since my last post I've purchased the "Lite Audio DAC-AM Modified" by Pacific Valve Company. This looks like it will work OK for me, however, I undertand there are better on the market but I am just getting my feet wet. Also, I understand this DAC can be further upgraded. Initially I was thinking about the purchase of a used DAC but I thought I would have to have that modded in order to bring it up to todays tech standards.

Is anyone here familiar with the Lite Audio DAC-AM? And can you give me some info on it? Will it reproduce 2 channel (stereo) music OK? I am not interested in TV, movies, etc. My primary listening will be to vocal and instrumental jazz, small and large scale classical works with a focus on choral music. Thanks for all assistance and your response.
1. "...The DAC do all the work".
2. "balanced in/outputs produce a better sound than does regular RCA in/outputs" all else being equal.
3. "compact DAC "the smaller the better" that offers good to excellent sound for not a lot of money": some of the Audio Alchemy DACS are small and though old and no longer come with customer service, offer good Red Book/HDCD sound, and can be found used here on Audiogon for not a lot of money.
4. "what should I be looking for...." Gee, I wouldn't know where to begin, but this is a good place to start.