So there is no need for subsequent stages to be maximally transparent if the source is compromised?
Why wouldn't distortion be additive? So that if one improved any stage that would provide a clearer sound.
My tastes are not audiophile at all, my first suggestion being a DAC that costs only 2/3 the price of the Meridian Director and Arcam ifDac which the OP is considering for her friend. It's not cheap in absolute terms, but it certainly is in audio land.
Please be so kind as to actually make a suggestion as to which DAC will be the maximally effective for the minimum cost given the compromised source that is in play. It's time for you to help her out.