Modding refers to home grown electronics enthusiasts who take a stock product such as a CDP, iPOD, amplifier etc, and make 'modifications' internally. These modifications are supposed to improve the performance of the unit. Modifications start from just changing the fuse, to replacing the wiring, and many times creating a shorter electrical path inside, or even changing the whole circuitry. Most common are replacing stock parts with what the modifier thinks are better such as transistors, capacitors, DSP chips, etc. All these modifications will void the warranty on the product. For all repairs you have to go back to the person who had modified the unit, as the original manufacturer would not know what to do.
Is 32 bit DAC better?
A digital signal is a series of finite numbers. A analogue signal is continuously varying quantity. The DAC take the finite numbers and converts them to continuous signals. In audio, this is usually a low electrical voltage that can be amplified and played on speakers.
In practice, the sequence of numbers is sent to the DAC with a clock signal. When the DAC receives a number, it generates a output voltage that it maintains till it receives the next set of numbers. When the next numbers comes in, the DAC rapidly changes the voltage to match the value represented by the new numbers. When this done what you will get is a set of harmonics represented by as a staircase shaped output. This creates multiple harmonics above the required frequency as represented by the Shannon-Nyquist theorem. To smoothen this, the DAC uses a low pass filter that acts as a reconstruction processor. Unfortunately, the filter may have a mild roll-off effect at the highest frequencies. Since it is very difficult to recreate the original signal precisely, all DACs end up with some amount of approximation. Mind you, these are very very small differences we are talking about, and mostly in the higher frequencies.
In an constant endeavour to improve upon their performance, DAC manufacturers use higher sampling frequencies and higher resolutions.
The resolution (16, 24, 32 bits) are the number of possible levels that the DAC is designed to reproduce.
The sampling frequency measures the speed at which the DAC can produce the output. As per the Shannon-Nyquist theorem, a DAC MUST, at the least, sample at twice the frequency of the original signal. If you take audible signals as being a max of 20KHz, a DAC must operate at a minimum of 40KHz. A Redbook Audio CD sample data at 44.1 KHz. So a DAC must work at a minimum of 88.2 KHz.
Given these basic premises, a higher resolution and sampling frequency will produce better results. That is at least the understanding in the Industry.