Not had experience of the DAC-V1 but I have recently been auditioning my next upgrade. I too have a Squeezebox Touch, which for a £220 box is one of the best pieces of kit I've ever owned. I love not having a computer in my music room but have access to all of my music plus streaming capabilities. The analogue out from it, again for a £220 box, is very competent, but to my ears, isn't a serious front end. Put it's digital out through a good DAC however and its a different story.
Up until recently I used an Audiolab 8000CDQ and used the plugin that allowed Asynchronous USB output from the Touch into the CDQ which worked really well. The only issue being that the best sound still came from putting a CD in the CDQ's drawer, the Touch was a little flat and lacking in dynamics and life by comparison. But over time I got generally bored with the CDQ's somewhat sterile and detached presentation so I started looking at upgrades.
Having tried the Naim ND5, NDX and DAC, I've settled on the DAC. Whilst I was interested in Naim's streaming solutions, I didn't find that any of it was as totally flexible as the Touch i.e. you can't run Spotify or any other subscription service or use any of the BBC iPlayer listen again streams (without having an iPhone/iPad attached anyway). Couple this to the fact that Naim has really done its homework when it comes to the SPDIF input with the DAC (not sure if the DAC-V1 shares the same SPDIF input stage but if it does, it should work well with the Touch) and it seemed like a no-brainer to carry on using the Touch through the DAC. Naim produced a white paper on its SPDIF implementation which makes for some interesting reading and having heard what it does with the Touch connected to it, I was sold pretty much straight away. It reminded me of the sound of Naim's early CD players - The CDS and CDi, lacking the warmth of the early players but the timing, rhythm and sheer involvement, connection and insight it gave you into everything you played was nothing short of addictive. By comparison I found both streamers to sound somewhat more in your face, bold and brash, lacking in the subtleties that the DAC made so beguilling to listen to.
From what I've read about the DAC-V1, it isn't a million miles behind the DAC, so I dare say it will breath new life into your Squeezebox Touch as a front end. The DAC has taken my modest little streaming box from a competent piece of budget kit, to some of the best digital reproduction I've heard anywhere.