I don't have a SB 3 but I do have a Duet. The difference in sound quality between the Duet analog and an external DAC was not subtle, even in an only moderately good system (15+ year old entry-level high-end equipment) and using a 15 year old DAC (PS Audio Ultralink). The Duet analog is fine for a typical receiver-based mid-fi system, but not for even an entry-level high-end system. Now also have a Touch running into a new Wyred4sound DAC 1 in the much better system, but have not had the time nor motivation to do any comparative listening tests. If your main concern is sound quality, I would personally go for an external DAC. I personally don't know anything about the DAC Magic. I was pretty surprised at how good the 15 year old Ultralink still sounds.
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