Wadia offers a range of D/A converters, but right now the least expensive model, the 521, runs $6,950 MSRP. That said, the company is developing a matching 170iTransport D/A with an expected MSRP of $1,000 or so. It should be out sometime early next year. If you can't wait for that model, check out Benchmark's highly regarded DAC1 ($975).
We didn't have access to those elite Wadia or Benchmark D/A converters, and even if we did, we'd learn more about their sound than that of the 170iTransport. Thankfully, any AV receiver equipped with a coaxial digital input will suffice. We plugged the 170iTransport's digital output into our Onkyo TX-SR805. It may not be high-end, but the Onkyo's D/A has to be a lot better than the one built into the iPod.
We compared the sound of CDs played over our Pioneer DV-45A DVD player to a third-gen (fat) iPod Nano loaded with AIFF and WAV files of the same music played through the 170iTransport (listening to both over high-end Dynaudio C-1 speakers driven by the Onkyo receiver). With every album--from artists such as My Morning Jacket, The Black Keys, Willie Nelson, and Wynton Marsalis--we heard no difference. The CD player and Nano sounded exactly the same.
We next compared the sound of the CDs with the "naked" iPod, by plugging the music player into an Apple dock that was, in turn, plugged into the Onkyo's analog inputs. We can't claim we heard "day and night" differences, but we definitely preferred the sound with the Wadia dock. The clarity/airiness were superior, and the solo iPod added some fuzz to the sound.
Please note: older iPods won't work with the 170iTransport, or they'll work with diminished features. For instance, first-gen iPod Nanos will output digitally, but the menu won't be displayed and the clickwheel won't work. That means you pretty much have to start a playlist playing before you dock the player with the Wadia. Newer iPod models provide full access and functionality. Be sure to check Wadia's FAQ before purchasing. (At the time of this writing, it hasn't been updated to include data on the latest September 2008 crop of iPod models, but Wadia has confirmed their compatibility and said that the site will be updated accordingly in the near future.)
As far as alternatives go, it's worth mentioning that you could get the same basic effect delivered by the 170iTransport by playing your digital audio files via the digital output of a PC audio card, and taking the iPod out of the equation altogether. Likewise, we assume the $600 Escient ZP-1 redigitizes the iPod's analog audio before it hits that unit's digital output (giving you an extra--and undesirable--D/A and A/D cycle), but we much prefer that unit's full on-TV display for navigating the songs on the iPod. Of course, its list price is about 50 percent greater than that of the Wadia.
Still, the Wadia 170iTransport is intended for persnickety audiophiles who want the highest quality sound, and by that measure, it delivers the goods. It's recommended for seriously discriminating listeners who appreciate the difference between uncompressed/lossless and lossy digital files, and who have the high-end equipment (serious D/A converters and excellent speakers) that will make the best of the 170iTransport's all-digital output.