Best DAC for 27" iMac

The Mono Price cable isn't "better". If you really want an optical cable that's "better", look at the VanDenHul Opticoupler and Wireworld SuperNova 6. Both of these cables can be made with "mini" on one end and "standard" on the other. They are true "polished glass" fibers.

iTunes will not play FLAC, but it seems like you are already in the process of reripping your collection. AIFF or Apple Lossless are the best to use with a Mac/iTunes. Apple Lossless takes up about half the space and sounds the same (to me), and it can always be transcoded into other "bit perfect" formats using third party software programs.

I just got an Aune Mini USB DAC. It's cheap and, in my office setup (with an iMac and Apple Lossless files), sounds terrific. It's got a headphone amp (reputedly a clone of the Graham Slee Novo) that sounds good, too. WAY under your budget, and maybe worth a try for that reason alone.

I would like to thank everybody for their informative feedback. For now I will get the cable from mono price and I'll let you guys know how much difference in terms of SQ i notice.
Cheers and happy listening,
Robin

From what I understand, the DACs in most modern receivers are more than adequate unless you want to spend $1000 + for an outboard DAC.

"Synthfreek
Why the implication that Apple Lossless is anything less than aiff or wav?"

I've heard it said that the sound quality of Apple Lossless can vary based on system loading. So while it should in theory be identical to an uncompressed file, a Lossless file which might sound great on a lightly taxed system could be degraded if decoded by a heavily loaded system. The computer I use for work is also used for music playback. Disc space is cheap, so I decided to give it the benefit of the doubt and go with AIFF.

Robin, Once you get your DAC sorted out, I recommend you experiment with Amarra and Pure Music programs. I noticed an immediate difference in my systems, to the point where I have a hard time listening to iTunes with out PM running.