'In a word..yep! But I will qualify this by saying that if you are running a "budget HiFi system" and replace your budget DVD player that has budget DAC's with a super slick DVD unit (eg. Denon 2900) with super slick Burr-Brown DAC's, then nup it's not gonna make much difference at all. Your HiFi system is only as good as the weakest component.' - Blizz
In all likelihood your loudspeakers are almost always the weakest component.
Rane Audio has a helpful discussion of this topic. It is directed more towards analogue to digital conversion, but it is still interesting and relevant:
http://www.rane.com/par-d.html (see data converter bits)
http://www.rane.com/note137.html
I read this some time ago, but here are what I would consider the important conclusions:
'Here is what is gained by using 20-bits:
* 24 dB more dynamic range
* 24 dB less residual noise
* 16:1 reduction in quantization error
* Improved jitter (timing stability) performance
And if it is 24-bits, add another 24 dB to each of the above and make it a 256:1 reduction in quantizing error, with essentially zero jitter!
As stated in the beginning of this note, with today's technology, analog-to-digital-to-analog conversion is the element defining the sound of a piece of equipment, and if it's not done perfectly then everything that follows is compromised.'
'...can the human ear tell the difference. In most cases, once you go beyond true 16-bits, the answer is no. All benefits above 16-bits/48 kHz are very small refinements, not monumental improvements. What really is going on, is that the advertised "16-bit/48 kHz" recordings of yesterday weren't. They used 16-bit converters but their accuracy was not 16-bits, it was more like 14-bits. Similarly today, the advertised "24-bit" converters are not 24-bit accurate, but they are certainly at least 18-bit accurate, and that makes an audible difference. So, if you can find a true 16-bit system and compare it with a typical 24-bit system of today, they will sound very nearly identical. And the sampling rate getting faster makes even less of an audible difference. For example if you compare a typical 16-bit/96 kHz system against a 24-bit/48 kHz, you will pick the 24-bit system every time. If you have a choice, always choose more bits, over a higher sampling rate.]'
You should also note that the analogue-to-digital converter (ADC) performance is usually more important than digital-to-analogue converter performance. There is, of course, nothing you can do about the quality of the original recording and ADC used. It is worth saying that even the earliest digital audio production equipment was considered very good:
'...experience has shown that even the first generation of digital systems are as good as some of the best analogue systems which have been evolved over many years. Digital tape recorders, of which several have been developed by the broadcasting organisations and record companies, have performance qualities which are far superior to the best analogue studio recorders.'
- Practical Hi-Fi Sound, R. Driscoll, page 63-64, 1980 Hamlyn.