^ I think that's fair and really well said.
Although, for #5 I didn't say that USB was the cause of the distortion but you did outline the process out very well nonetheless.
As I mentioned, these are all generalities until you actually factor in a specific DAC with the quality of your existing setup and cans.
There's alot of people in the SPDIF vs USB camp, don't get me wrong I don't particularly advocate one over the other and I appreciate having USB functionality on my DAC for things like laptops (although mine isn't very portable anyways
).
The thing about SPDIF vs USB is that windows drivers only natively support up to 24/96 on USB (of course realistically 24/96 is really good and 192khz is just overkill among other things). If you want to go higher, you need to install special drivers. Some USB DACs also require drivers to be installed regardless anyways. SPDIF doesn't have this limitation to begin with and it doesn't require special drivers that you need to install on the side. So yes, any device with unstable drivers or firmware can cause problems but USB is more likely to run into hiccups over SPDIF because there's more overhead and special drivers involved with USB sound output. This, along with all the crappy controllers utilized were some of the issues back when they first implemented USBs into DACs.
Most people say that on the same DAC, SPDIF and USB sound the same. I would agree with this. This is very subjective though and I don’t think there have actually been any conclusive studies done quite yet. I think this does hold true as long the quality of the cans, music and the system overall is consistent with what should be used for that particular quality tier of DAC. I know this sounds redundant but if you are listening to lossy music or using very crappy cans, for example, then there’s really no merit in comparing USB vs SPDIF.
There’s also that whole native USB driver spiel that needs to be factored in. Due to all of this, I think it's still important to consider USB vs SPDIF implementation for DACs at various pricepoints. At lower price points, I'm not really sure how the newer USB DACs perform compared to SPDIF based ones. I know the older ones had more issues and were often bottle-necked by some crappy controller. I think even with all the improvements we've seen, there are still some lingering issues that haven't been completely resolved. Mid to high price points DACs are generally well engineered anyways so both USB and SPDIF will sound great - especially if the DAC supports both USB and SPDIF.
When it comes to picking a DAC, I would say just keep in mind the whole SPDIF vs USB thing. From my experience and what I've seen and read, USB tends to have more issues over SPDIF. This was especially true from (2010-2012). I personally think USB still has more issues over SPDIF generally.
The more important thing about DAC picking is to make sure it matches well with a particular set of can(s) that you possess or plan to buy. Certain DACs pair very well with certain headphones.
It’s kinda like keyboards actually. We all start from an entry level mechanical keyboard only to realize it's bad and then get something better. Then you go crazy with keycaps and other various things. We all lust after those expensive custom made keyboards. I guess what I'm saying is that if you’re planning on making the trip to hi-fi, it’s well worth the money to invest in a DAC that costs more money because that $100-$200 DAC (not that these DACs aren't good) is going to be like your first entry level mechanical keyboard.