Hi there,
And welcome here…
So yes, the Drone Dude has it also working well as the same. I2S is the chosen method for fidelity and PWM if it’s just a basic sound out kinda thing. None have DAC’s worth the effort so the External Dac works well. Check out the reSpeaker as well, tricky but definitely a nice sounding product. The I2S has threads all over here for all MCU’s and even some micropython AFAIK. C3 is good enough but to play from internal flash I would use and S3 (psram) and more support.
HTH
GL 
PJ 
Hit the search up top for more on I2S, Audio out of Xiao ,and DAC for all the goof info you’ll need. After a few posts you’ll get enough forum cred to post pictures, new topics and more stuff 