Upgrade my CD player or buy a DAC?


I cannot decide wether I would be better off buying a dedicated CD player or a DAC and use my current player as a Transport. I am currently using a Yamaha BD-S2900 as my CD/DVD player. I use my system almost exclusively for 2-channel audio, mostly Folk, Rock, and Jazz. My current setup:

Vandersteen 2CE Sigs
McCormack RLD-1 Preamp
Sunfire 5x200 running Biamp
Yamaha BDS-2900
Apple G5 for digital music
Audioquest King Cobra Interconnects
Audioquest Type-8 Speaker Wire

I have a budget of up to $600, let me know if you have any advice.
nickryder
At that price point I would get a Musical Fidelity V-DAC and a decent digital cable.
Also consider the Moon 100D. Whichever digital cable you buy (I seem to like cryo'd OCC copper cables myself), make sure it is 1.5 meters long.
There are a couple of good arguments for going with a separate DAC. One is that DAC technology is changing rapidly and having the flexibility to upgrade in the future may be an advantage. You'd also have the option of going to a better transport when you can afford it.

The other is that an external DAC would let you have multiple digital inputs. There are players that have digital inputs but probably not within your budget.

And I'd second Tobias recommendation of the Simaudio Moon 100D.
i would suggest to save your money until you can get the wyred 4 sound dac1 or dac2. it all depends if you want to upgrade to something much better in the future (and lose money on a cheaper purchase) or buy something top notch and grow into it with future upgrades from your other equipment.
The answer to your question is a no brainer. Go with the seperate DAC! If I were you, I would save a little bit longer and get a used (from this site), Benchmark DAC. It will be the best investment you have ever made. Read the reviews. Class A in Stereophile and has been since its introduction. It's also a headphone amp. It can be used as a preamp. It has both single ended and balanced outputs. Absolute bargain. I have seen them on this site for less than $600.