Newbie Help Please...

The DAC I am currently using is an Emotiva XDA-1 which does not re-clock the signal. Will this defeat any chance of getting good sound?

Lots of people on this site love the XDA-1, and general consensus is that this DAC is a great value. I heard one at RMAF and I was pleasantly surprised, but I don't know if they were running the signal into the USB connection or not, I suspect not, I didn't see a laptop. I don't know how good the USB implementation is on the XDA-1. Keep in mind, it's USB is only 24bit/48kHz, so if you are playing hi-res files, you need a converter to go into the other inputs, which are 24bit/192kHz. I'm not saying the USB on the XDA-1 is bad, just that using a good USB/SPDIF converter would be better.
There are other issues to consider, like playing audio within windows vista. Not sure of any driver conflicts here. Try to use Jriver or Foobar, or purchase Jplay to run within iTunes. Simply playing music through USB using only iTunes will not yield results that are very good. Jplay, Jriver and Foobar all utilize WASAPI and/or kernel streaming, which bypasses certain Windows signal processing that hammers the sound quality.
Of course, if you are using an iPod and, say a Wadia digital dock, these software issues are out-of-mind. But a digital dock can still benefit from a re-clocker.

Makes sense Realremo. I think I will go for the I-pod doc as I am not that computer savvy. Thank you for the suggestions!

Go with the Wadia dock, they were the first to bring the digital iPod dock to the market and their product looks the best...! There are usually a few on A'gon for sale.