My Audio note 2.1.x dac sounds wonderful and I feed an ipod through an Onkyo ND-S1 (takes off digital sound from an iPod/iTouch like a Wadia 170i).
The new Ayon CD-01s CD player/Dac(which has a digital in) is reportedly one of the best CD players around and has a fantastic DAC inside of it). Reviewers have compared it to being equal to vinyl from a high end setup. You can easily feed a coaxial digital signal into it from an iDock like the Wadia 170i or from a Squeezebox touch.
Dealers seem to be willing to discount around 20%+ on the list price of an Ayon CD-01s, so a Ayon CD-1s can be had for around $3,500 or a little less.
However, in my system, the iTouch through an iDock which takes digital (my Onkyo ND-S1 idock) sounded better than the Sqeezebox to me which sounded a little compressed and lost a little soundstage and seperation of instruments(although close).
By the way, the Onkyo ND-S1 is not sold in the US market but can be purchased from a seller from Japan on ebay. It is about half price of the Wadia 170i and sounds every bit as good to me. The power supply is a switching one so, it works just fine in our sockets and with our 110-120V 60hz current.