The audio file is first decoded into analog by Itunes, then encoded again [...]
If you use the Airport Express's analog out, then yes, you're using its built-in DAC. However, that same jack can also output optical S/PDIF via a mini-TOSLink-to-TOSLink cable, which most home theater receivers made in the past few years can accept, and then do the D/A conversion using their converters, FWIW.
In principle all DLNA devices can play the content of a server.If a renderer don't support the codec, the server is supposed to convert on the fly to a format the renderer does understand.
I'm testing also Winamp "remote speakers" plugin by Eric Milles using Airplay protocol. Sounds OK, but it's not free and I'm not sure I get the best out of my N-50 DAC. Who's doing the DAC ? Winamp + my PC as the term "Remote speakers" would suggest or at the N-50 ? Well I should probably be able to figure out by listening carefully.Using BlueStacks for Windows I can also use my PC to remote control the N-50 through the Android app. Definitely not as easy as Winamp but it does the job
As for "who's doing the DAC?" Airplay is digital even with Remote Speakers since it is following the Airplay protocol. Since your N-50 supports Airplay, it is the DAC in your case.