Is the iPod your only source? Peachtree Audio iDac looks like a good candidate. Of course, there are many musical candidates under $1k, but most lack the iPod docking capability.
I just got the idac and am very impressed so far. I pulls the digital signal direct from the ipod and processes the signal via dac. The output thru USB was as good as other input sources which eliminates the need for a S/pdif converter. There is a good review in Stereophile this month and previously in Absolute Sound. What swayed me over the Rega was the better USB performance, less coloration (according to the reviewers) and the ability to doc the ipod and use a remote.
If you can stretch your budget a little, the new Ultra Fi DAC-41 should definately be on your list, it's one of the most musical DAC period (selling for $1250 introductory price). This is the successor to the Tranquility SE DAC that's received so much praised.
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