Ultimately at best they can only give a 100%
identical copy of the CD source data, or maybe with some read errors,
but never better.
One would think so.
Without explaining (sorry) the technical in and outs - because I would get them wrong no doubt - lossless through a decent budget DAC sounds better than many budget and some mid level CD players. I will leave others to explain that if it can be explained.
I had to spend out on a CD player that now costs £895 brand new to significantly improve on a £180 DAC playing lossless from iTunes via a USB cable. This was proved to me via a Naim Nait XS with Rega RS1, Rega RS3 and PMC FB1i speakers and the amp I have now. (Nait 5i)
In my old (pre April) system with the Arcam Solo-Mini, the DAC (iTunes/USB from laptop) comprehensively out-performed the built in CD player to such an embarassing degree that even 256kbps AAC iTunes downloads were noticeably more enjoyable. In fact, even a Fubar USB II DAC comfortably outperformed the Solo-Mini's CD player with lossless files.
I would say (all else being equal in a reasonably revealing system) that the likes of a Beresford TC-7520 and/or CA DacMagic will trounce CD players up to around the level of a Rega Apollo or similarly good CDPs.
This is from my own experience of hearing all the above either at home, during in depth demo sessions or at length on a friend's system.
Rega P2 • Ortofon 2M Blue • Rega Fono Mini • Naim Nait 5i • Naim CD5i • Naim NAT 05 FM tuner • Rega R3 loudspeakers • Naim NAC-A5 speaker cable • Beresford TC7520 • Panasonic DMR-EX78 DVD/HDD • Chord Chrysalis, Crimson & Naim interconnects