The USB DAC market is indeed going to be huge. Everybody's listening to digital music through earplugs and headphones, so people are primed for a higher quality offering. Even though the percentage of music fans interested in fidelity will be a single digit, numerically it's a big market opening up. I don't know about you, but for the rest of my life there will be a computer of some sort running in the corner of my living room. Storing and indexing music in lossless format is pretty trivial nowadays, and within a couple of years you'll be purchasing lossless encodes from iTunes and so forth. It's pure convention that a spinning plastic disc in your CD-player is a richer source than the same bits streamed from a hard disk. The purists won't ever want a noisy, ratty, websurfin' computer galvanically connected to their audiophile systems, but I guess the rest of us can buy a mid-price USB-DAC and with a bit of due diligence make the setup sound really good.

Interesting question. If I were a high end equipment manufacturer looking for a quick buck, that would be an absolute no-brainer. These days, many people's computers and/or iPods constitute the main (and often only) source of music in a given household, specially if by "people" we mean "under 35" (which, in turn, also means "Champagne tastes and a beer budget"). Makers of budget-priced DACs could hit the jackpot here - specially if they can get rave reviews from iLounge.com or other sites catering to the iPod fanatics. Stereophile just reviewed a budget receiver (The Outlaw RR2150) which features an USB port in the back. iPods and derivated accesories are also popping more often on this kind of magazines. I think it is just a matter of time before hard disk-based audio (uncompressed, of course) gets regarded in equal respect as SACDs or vinyl are today. It would be suicidal for high end to do otherwise.

There are a few high-end USB DACs out there already and more are on their way. Most notable at this point is Wavelength Audio (http://www.wavelengthaudio.com/usbdac.html) who offers 3 levels from $1750 to over $10,000. I have heard the Cosecant and it is an amazing product. The Brick is the most economical and has a Class A rating from Stereophile.