That Meridian is a good unit. Can you update that to a 508.24? You might get more bang for the buck. Plus you don't have to buy a digital cable and another power cord...
You might be able to find an EVS Millennium DAC 1 for around $400 or so -- very dynamic, transparent, and tonally pure. I also have a McCormack DNA-0.5 Rev. A, and I find its transparent nature to be an excellent combo with the EVS DAC, unless you're looking for a warm and/or tubey sound. Best of luck.
With what you have, I don't think you'll get much improvement unless you go to DAC's in the $1k-$1.5k used range. I had a DAC 1.1 and it is indeed very good and quite different than the 506.24 but it is not clearly better. For that you need to look to a Muse two ninety six, or an EVS Millenium II, or a Musical Fidelity A3 DAC, or other DACs in that range. Maybe even a Bel Canto Dac II (I have not heard it yet)
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