I don't feel like I have enough experience to tell you how good a C2 is, but I can tell you that I love it and most people seem to say great things about theirs. I would guess that the basic C1 sounds just as good but with less features.
The big difference between it and a passive preamp is the complexity. I think the main idea of a passive preamp is that it's not powered, and usually that means less features. Less features means a very short and simple signal path, which is theoretically good for maximum sound quality. I don't think the difference is a huge deal in practice though. My passive preamp is basically just a volume knob that sits on my desk, which is perfect for what I'm doing. I'm using the M1 amp with a Modi DAC connected to my computer as my "daily driver" system. You can look up the Fostex PC-1e or Emotiva control freak (discontinued) to see what I'm talking about exactly. If I was using the amp for more of a normal stereo setup like I was using before I'd go back to the C2, actually I'd like to set up a vinyl only system in another room with it someday.