If there is a good on board DAC compatible with PBP, that would be fine
Can you suggest one?

I imagine al the caps in the diagram are to smooth out intermediate steps?
That's going a bit far for me.
The 1kHz sine wave is to hear audible clipping matching an amplifier to a source.
I think it does have to be of fair quality to begin with.
What we hear are the tops and bottoms cut off the sine wave,
which may not be as noticeable if it is squared off to begin with.

It's a pity a DTMF encoder can't be dumbed down to do single frequencies.