Can DAC with volume control act as Pre-amp?

Do not underestimate the advantages of a good quality integrated amp; no impedance issues, one less interconnect etc. usually translating to less hassle, more bang for your buck-but yes, less flexibility.
When looking at budget DACs with volume control, it is important to know how it is implemented, e.g., gain or no gain, digital vs. analog attenuation, and the quality of the analog potentiometer.
I have no experience with the Audioengine DAC, but I did have the Nuforce uDac I in my budget office system for a while. Although it uses an analog volume control, there was a huge improvement when I bypassed it (turned to max) and inserted an Axiom passive preamp for volume control.
If you are going to use a laptop as a music source, I strongly recommend DACs that focus exclusively on USB input and use asynchronous chips/DAC implementation or the CEntrance method (which Benchmark uses).
I replaced the uDac with HRT music streamer II, and I'm amazed how good that little DAC sounds. No volume control though.

That is how we setup the Antelope Zodiac Gold that we used in the Earo room at the last RMAF show.

The Zodiac Gold DAC was used as the preamp for the USB input from the mac laptop and also for the analog RCA input from the phono stage. The preamp and volume control are entirely on the analog side, which sounds great and preserves bit resolution.

It's going to depend on the particular pieces in question, but many around here will say they prefer using a pre or integrated to using the volume control in their DAC. I have the Perfect Wave DAC, and even inserting a very inexpensive Pre (an old Adcom) was an improvement over the PWs volume control (which sheds bits under 50%; bad for a quiet listener like me). I ended up with an integrated (Pass INT-30A), and am very happy; I'd seriously consider the integrated route, esp. for a second system.

John

Certainly you can use the DAC with its volume control as a preamp. Absolutely yes, that means you might be able to save some money to spend on the power amp.

This hobby is an upgrading game, and although you might get better sound with a straight-up DAC, a preamp and a power amp, that is the spendy solution. Keep costs reasonable now and you can retain the spendy solution as a goal.

The least spendy solution -- no-one wants to say cheap in the high end -- could be a DAC and an integrated, and integrateds are pretty dang good today. You could be very happy for a long time with an integrated costing $3K and maybe even more.

It depends on what level of high end will satisfy you. IME spending a lot on the power amp early on won't often get you as much fun as spending the same on the front end and using a more economical power amp for a while. But if the DAC/preamp is a good one, if it has a sound you love to listen to, why not?

There were some good threads in the past about this. Here is a short one (link at end), with the same idea. I've have plenty of gear through my system (a lot of friends that buy and sell sure helps) over the years. I have had mixed results. Most of the time, I end up with a preamp in the chain too. It's not always a gain issue, or impedance matching issue. Sometimes a preamp just makes it sound the best. I did have it running without a preamp on occasion too, and liked it. But generally, I end up with the preamp in there. If you have a chance to try it both ways, go for it, just to see. A lot depends on the blend of components your running too. A lot of preamps will deteriorate the the sound. When your using upper-end sounding ones, you may not know they're there, and other times, it just makes it right. A short thread with some answers for similar.[http://forum.audiogon.com/cgi-bin/fr.pl?aamps&1324679030&openusid&zz]