As I understand it, the WDTV downsamples to 16-bit, but at least 24/96 will play. So I would prefer to go with a 24/96 when/if I upgrate to an audio player. BTW, the WDTV works great for me as a video player.
Anyway, my setup: WVTV Live (not networked, but free-standing), fed by an external USB JBOD HD (Not connected to a PC, but free-standing), and Toslink for the audio out to my pre-amp/processor.
Several USB DACS look attractive (like the affordable HRT II+) but most USB DACS are for a PC setup. Some require drivers and are more like a glorified sound card. Or else they are WAY too expensive (and dont support USB inputs anyway).