DAC on Universal player

I would have said the Tri-vista 21 which might be a bit steep for your taste or not. I was looking at the same solution as you, that's why I was drawn to this thread. I am interested in SACD as well as good redbook playback which seems to be a nomenclature at this point. The trivista SACD appears to do both well but at 6.5K. I have also been looking at alternatives, and thought this might be a solution.. Use a DAC to get reasonable Redbook performance. I just read a link about a guy who bought the new 9000 Sony SACD and the tri-vista 21. He could tell little difference with it in and out of his system (the tri-vista)... a little disconcerting... I hope we get more responses to your query... Real world examples would be nice...

Audiotumbler and Arthur I think very few thinks that
modification does not do much.
These are the reason to modify,you will get a stunning
result for less money,its cheaper,so many parts upgrade
that in my case,Like Sean said take advantage of short
path,My Sony 9000es for $1700 fee,its worth at least 5k,
maybe more,because I heard a cd player 3k, did not even
come close.I hate to mention brand,You can email me if you want to Know.

I needed an outboard dac for other reasons and ended up with the MF Trivista 21. I also wanted to delve into hi rez digital and have the Marantz 8400 (decent redbook playback but not at the same level as my Naim CD5) therefore I connected it as a transport to the trivista 21 and that, to my ear on initial impressions, is better than the Naim CD5 (without flatcap). As stated above the SACD output is only analog, no digital DSD stream, so you are left with the universal player's DAC for SACD. However, the DVD-Audio stream can be sent to the outboard DAC for potentially enhanced digital-analog conversion. Overall, I think the outboard DAC can enhance your listening experience if you have a marginal redbook player(the trivista 21 may even outperform an excellent redbook player such as my Naim CD5). My understanding is that the DAC will have no role on SACD playback and may or may not improve your DVD-Audio playback. Hope that helps.
BTW after an extensive A-B comparision I thought the MF Trivista 21 DAC connected to a transport played back redbook CDs better than the MF Trivista SACD player-but not by much. Hopefully, it will do so connected to a music server.

Is there a used DAC for $400 - $800 that would be an improvement over what the Denon's internal DAC's do?1

I don't think there is a usd DAC in the price range you just mentioned that would improve things enough to be worth it. I agree with the folks who said that modding the player will make the greatest improvement, and not only to redbook.