In most cases, the DAC performs some DSP to upsample the incoming signal to its maximum sample rate (more or less) regardless of what you feed to it. There are a small class of DACs out there that do not work this way, but for the most part, most of the gear that you will encounter is doing something like this.
So upsampling is going to be happening either way. Either you do it first, or the DAC does it later. Or you do some of it first, and the DAC does the rest. Either way, the digital signal is ending up at a very high sampling rate before it is converted to analog.
So if we use the photograph analogy. The question is not “will upsampling it to 20 megapixels make it look better”. The question is “If I must display a 10 megapixel photo on a 20 megapixel display, what is the best way to scale it up?”.
And that is not a question with just one answer–in the domain of audio or in the domain of imagery. There are lots of algorithms/approaches at different (performance) cost levels with different quality implications.
The reason why software upsampling can be an enhancement is that there are far fewer performance limitations in a computer–big general purpose CPUs can run more complex and expensive algorithms than DAC chips do. Software-based upsampling opens up the opportunity to select filters/algorithms that make different design tradeoffs than the one that the manufacturer of the DAC chip made.
There is nothing inherently good or bad about the design choices made in the DAC. They were designed by practical engineers working within performance constraints just like everything else. There are always tradeoffs to be made. Software-based upsampling gives access to a more resource-rich environment where fewer tradeoffs are necessary, that’s all.
There is an awful lot in the audiophile world that truly doesn’t make sense–where no-one can do better than theorize loosely about the mechanism upon which a change might affect perceived sound quality. This isn’t one of those cases. With upsampling, we understand what we are changing, how, and why.