09-20-12: Peter_s
Great if you can use your internal disk instead of external. The Dragonfly manual recommends using a different Bus if you are going to attach an external HD. Specifically, use a firewire for your HD and USB for your DAC.
My MacBook Pro has a Thunderbolt interface, 20x the speed of USB 2.0. If I upgrade the external drive that's what I'll get. In the meantime, I downloaded Audirvana to run my music files, and it appears to be a great matchup for the Dragonfly's capabilities and USB drive's limitations.
Audirvana enables you to create a multi-gigabyte cache in RAM for buffering music files. So now the speed and traffic on the USB bus is less of an issue--the music is streaming directly from RAM. I was contemplating paying $189 to get this in Amarra, but Audirvana offers it in Audirvana Plus at $50.
It provides a selection of upsampling schemes, overriding iTunes' up sampling everything to 24/96. I changed everything to 2x oversampling, so all my 44.1Khz ALAC files are now upsampled to 88.2Khz. The Dragonfly's color indicator changed from magenta (96KHz) to amber (88.2Khz) indicating that it's working, and I noticed a welcome improvement in the treble--smoother and more relaxed. I noticed better bass extension and fullness with Audirvana as well.