Do I Need An External DAC When I Have An X-Fi?

It depends. It depends if you're a gamer, if you're running a 5.1 speaker setup, or if you're upgrading simply because you heard it was cool. If it sounds fine right now, you probably won't see much of an improvement after vesting hundreds of dollars into the high end audio tech pool, and in all likeliness, you'll end up hating yourself for it without gaining the proper knowledge beforehand and jumping into a hobby that's just for ultrageeks and extremely picky music listeners.

That said, there are plenty of reasons to get a separate, dedicated digital-to-analog converter (DAC) that runs via USB from your computer or feeds out of your digital line-out jack of your current X-Fi card. Not only will the sound become much more clear through your speakers and headphones, but you'll immediately be able to tell the difference between lossless audio and MP3's right off the bat. You should only use your X-Fi's line-out if you're a gamer, as most DACs have no idea what to do with gaming effects such as EAX and CMSS-3D, and will likely cause a slowdown on your PC if not handled correctly.

There are plenty of options out there for USB DACs, coming in flavors of the very-cheap and great value (such as the EMU 0202), or you could go with stylish ones like the Firestone Fubar III. The only limit is the size of your wallet and how much you're willing to prowl audiophile forums like Head-Fi and travel to stores around the country until finally finding something you'll fall in love with. It's a fun hobby, if not addictive like crack - just make sure whoever gets caught in between is someone very supportive of your habit.