Hi Gary.
I've never used the DACMagic via USB but via the squeezebox via coax digital it is AMAZING. Night and Day better than the squeezebox analogue out. (I've heard that USB is meant to be not as good as coax - something to do with jitter I think - but probably it makes no practical or discernable difference (unless you're using outrageous kit!))
On the subject of the squeezebox it is without doubt one of the best bits of kit I have ever bought - I have NEVER regretted it. Its small, has a great display (Squeezebox 3 not duet), and I can control it with my iphone so can flick through all album art etc just like the new duet controller and the Sonos controller. It is seriously good. Takes a bit of setting up but once done it is awesome - you also need a computer on to "serve" the files but I have an HP mediasmart server which is on 24/7. Its basically a bit-perfect transport that will happily serve to a cheapo dac or a Billion-pound-ultra-amazing-dac wirelessly to anywhere in the house. Basically you will NEVER need to by another transport EVER in your LIFE...............unless it breaks.......
Matt!