I believe that using a high-end DAC (or a Wadia transport) on lossy files makes no sense.
That is my basic question. I am wondering if a high end DAC will make AAC lossy files sound any better than through the ipod dac.
It's just too small to have proper DAC. Even with top of the line earphones in a soundproof room you won't tell the difference beyond 128 on an iPod (on AAC that is, MP3 is over 20 years old and quite sucky so larger files will make a difference).