There's a _very_ big difference in quality between the iPhone earbuds and high quality earbuds/headphones, and a relatively small difference in quality between different DACs. And outboard DACs come with a lot of tradeoffs: extra hardware, battery life (or another battery to charge), cost, and so on. So there are many people who care about sound quality and invested in high quality earbuds/headphones, but rationally didn't spring for an outboard DAC. You get 98% of the quality without it.

I found the DAC to be good enough, way better than any mp3 player I used before the ipod was released.

Complaining about the sound quality of earbuds is only "silly" if the iphone DAC is so bad that one wouldn't tell the difference between a good and bad earphone, which is clearly not the case.

Again, I'd say, that it comes with an adapter and you can still use whatever headphones you want. So it's a non-issue IMHO.

I don't for two reasons. One I don't want to carry dongles. Two it blocks the charging port and I often listen to music at my desk, where I also need it to charge. Doesn't work for me.