PSB Guy

In answer to your first question, I personally think that amp/DAC/headphone combo would be just fine for the money invested. Secondly, no, that amp (NAD 355) doesn't have an onboard DAC, so you will an outboard solution. Yes, you can think of the DAC as an external sound card. Once you plug it in and select it in your settings it effectively replaces any on-board sound hardware.