Do I need a DAC?

Whether you'd get appreciably better sound quality from an external DAC depends a lot on the source material too.

Are you playing hi res files, CD rips or just 128kbps iTunes downloads?

Thank you for all the responses!

B_limo: I never said I didn't care about the sound - I simply said that I am not OBSESSED by having the best of the best. Big difference.

I am mostly playing 265kbps or higher from iTunes, but not 24-bit and so.

Keep the responses coming guys :)

Oscarrr, you don't need to be playing 24 bit files to be able to appreciate a better DAC. Most of my files are standard 16/44 and I find an external DAC necessary for the low cost sources that I use.

Oscarr, you have a great entry level system in the making. The express represents the weak link. A DAC would serve as an upgrade. The PS audio digital link III is often found used on this site for ~$350. Good DAC at that price, especially when avoiding the USB input. I play 44.1/16 bit files ripped from CDs.
The express outputs SPDIF?

"I am mostly playing 265kbps or higher from iTunes, but not 24-bit and so."

Thats the your biggest problem. It really doesn't pay to upgrade your equipment to play lossy files. I would first worry about re ripping everything you have to a format's like FLAC, WAV, or Apple Loss-less. Once you do that, you will be able to get the most out of whatever equipment you choose to upgrade.