Upgrade my CD player or buy a DAC?

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.

I think that most would agree that the DAC has a more significant impact on sound quality than does a transport, especially at your price point.

Test 1: Connect your CD player in parallel through the DAC and directly to the system for an A/B comparison of sound quality.

Test 2: Connect a 2nd CD player to the DAC using an identical CD and do the same A/B comparison.

I suspect that you'll confirm that the DAC is a better upgrade.

Also, a DAC can be used with multiple pieces of equipment. I do not believe that you could get a new CD player that can double as a DAC for your budget.

I second Griffithds's recommendation: Benchmark DAC1. If you're patient, you can find one second-hand for $600. If you don't like it, you can sell it on without a problem. It's a fantastic piece of equipment.