Ken, I heard exactly as you did but I'd seen lots of posts that said that the DAC in the Touch was really quite good. Well, compared to cheap DACs (and compared to the old SB3) it probably is, but my Oracle DAC1000 sounds great with the Touch too as I would expect the PS Audio DAC to do.
I still find myself spinning CDs on the Oracle transport when I truly want to escape, but the Touch serves as a really fine transport. So good, in fact, that I've kinda set the project of playback direct from computer to DAC on permanent hold. While I suspect it could be made to sound better than the Touch (that might make for an interesting comparison), I love the flexibility of having a Touch, SB3 and Duet in different parts of the house all working off the same music db whenever/however I want.
Interestingly, since I've now got the Oracle DAC & Transport (thank you again, Shane!!), I find myself rarely spinning vinyl. Not that I don't love vinyl (I do!), but now whenever I do so, my nervosa creeps in wanting to check the cartridge, clean the vinyl, etc, etc... More often than not, I just want to turn out the lights and forget there even is a stereo system.