Actually upsampling can improve sound quality. The main reason is that the analog output filters can be improved as the frequency they need to remove (the sampling frequency) is further fom the higest audio signal that needs to be preserved. Many upsamplers either add bits extending 16 to as much as 24 or they dither the LSB for evey other sample to improve the noise floor. Admittedly both of these techniques make pretty small improvements but to a large degree small improvements is what high end as opossed to typical stereo is all about.

People spend a lot of money on the D to A process because after you have decent equipment this yields the biggest improvements in redbook CD sound. Read owner reviews of some truly high end converters where owners say things like "who needs SACD, my new XXXX D to A sounds just as good" In my case, I bought a used Levinson D to A - unlistenable CDs became good and good CDs became spectacular. Most bang I ever got for my audiophile dollar.