Do I need a DAC?

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Probably the wrong place for this, but thought I'd give it a whirl.

In essense I don't really understand the need for these things, but I have heard they can dramatically improve sound quality. My other issue is it seems to me they improve stereo sound quality, but I can't see how this will help in my situation.

My current set up is -

Sources:
SKY HD - optical cable
HTPC using onboard sound card, although I may put in an Asus Xonar DG I have laying about - optical cable
Xbox 360 - optical cable
PS3 - optical cable
and occasionally I will dock my zune directly to the amp - RCA stereo cables

The Amp in question is a Yamaha RX-V 1400. This has no HDMI inputs. Not planning on upgrading this as to get a similar or improved quality sound will cost £1000+, and not worth it for gimicks and HDMI inputs.

As far as I can tell, I either can't get a DAC that would take all those inputs, or it would cost a stupendous amount of money to do so. I also don't think it would help on anything I am using for surround sound, so that would only leave the zune dock, which isn't used too often.

I would however mainly want to improve the sound from the HTPC, which to be honest isn't bad at all anyway, but I can't see how getting a DAC would help? Surely if I'm taking a digital signal from the HTPC, converting it to analog with the DAC, then the amp is converting it back to some sort of surround sound I am just adding a process that will degrade sound quality?

I could be however, and very likely am, getting this totally wrong and need someone to tell me whats what!
 
You already have a DAC, which is in your AV amp.
The question I think you're trying to get to is whether an add on DAC will improve things.
My guestimate is "probably not". The Yam you mention is IIRC close to entry level and would almost certainly be the bottleneck from a sound quality perspective. If you really wanted to move things on, you're best plan would be to save up some dosh and buy a s/h legacy processor and power amp combination.

Ref your question on inputs. I've seen very few DACs (or processors) that have 3+ optical inputs. Having said that, you can get optical to coax convertors for £10 a pop, so that would be an option.
 
The Yamaha is most certainly not entry level. It was a £1000+ amp 7 years ago, the equivalent today would be one of the Aventude line of amps I believe, probably the RX-A1010, which is a £900 AV Amp!
 
The Yamaha is most certainly not entry level. It was a £1000+ amp 7 years ago, the equivalent today would be one of the Aventude line of amps I believe, probably the RX-A1010, which is a £900 AV Amp!

I've yet to hear any AV integrated amp that I liked, so I'm still going to state that I believe that your AV amp is likely to be the bottleneck.
For all that, the Yam is probably the one of the best integrated one the market. To go for a genuine improvement, I do think that you'd be looking at a processor/power amp combo, eg. an Audiolab 8000AP and add on amps.
 
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