If I bought a CD player that's about the same price as the DACMagic (£200ish), do you think I'd see a significant improvement in quality?
You can't play music with just a DAC. You need something as a source as well.
So, to compare you really need to add together the cost of the PC + software + DAC to make a comparable price for a CD player. Then you're looking not at £200 but more like £700 - £1000. At that price point the CD player to bear is the Creek Evo II - £650 new and a seriously good bit of kit.
The other thing is sound quality. It's not just definition: That should always improve with higher quality gear. The harder thing to get is that sense of timing and playing together that is a very elusive quality even in high-end gear.
Words are a poor substitute for the listening experience, so the closest way I can describe it is comparing a track from your favourite artist on their best day to a cover version played by session musicians just going through the numbers. One would have soul, passion, intensity and communicate in lots of ways. The other would be technically correct but devoid of emotion. Music vs muzak. Just buying a better CD player or a better DAC or spending more money in general doesn't guarantee an improvement in that area, and it's where PC based/streamed audio systems just can't compete.
Yesterday I was listening and comparing CD players. Creek Evo II (£650) vs Electrocompaniet Prelude PC-1 (£1400) vs Electrocompaniet ECC-1 (£2300). It would be easy to assume that the PC-1 being more than twice the price of the Creek would easily be better... but it wasn't, and not just in emotion. The Evo II vs the ECC-1 was a harder call.
If you were listening for the buzz word that the hi-fi mags use such as transparency, openness, attack, etc etc then you'd probably have picked the Creek. But listening to how the musicians player together, and the emotion in the voices, and whether the music made sense then on simple stuff the two players did well. But when things got a bit more complex the ECC-1 really started to show how much better it could convey what was coming off the disc.
I've heard some very high end PC based audio systems with tricked out linear power supplies and all the goodies playing super accurate rips in to seriously high-end DACS such as the dCS Scarlatti (£13,000 to you sir) and so far none has beaten a humble £650 CD player from a little British hifi company who have been making music systems for 40 years.