Which is correct ..."is" or "are" ?

I think it should be "is faulty". A significant number expresses a quantity, a single statistic, and should be treated as singular. There also isn't a clear distinction between the individual Digiboxes, so they can be thought of as a unit.

Of the 10 million or more Digiboxes out there, a significant number is faulty.

'A significant number' means 'quite a lot'. Hence, I would use 'are'. It is not the number that is faulty, but quite a lot of Digiboxes are faulty.

Of the 10 million or more Digiboxes out there, a significant number (of them) are faulty.

ferdis' explanation is correct. Many native speakers will be confused by the plural of digiboxes and make the verb plural because it "sounds" better to have a plural verb after a plural noun. The word 'number' however is singular.

You will find strong arguments for both sides.

A number of boys are missing. (You cannot use 'is'.)

Hence, " ...a significant number (of digiboxes) are faulty."

Am I on the right track?

It's a troublesome point, and American and British usage differs. It has nothing to do with Digiboxes being plural, though. After some reading up, I'm not sure my first statement was correct. I would probably say:

"A significant number of Digiboxes is destroyed by the company each year" (they all undergo the exact same treatment as a unit) but

"A significant number of Digiboxes

Yoong LiatA number of boys are missing. (You cannot use 'is'.)

Hence, " ...a significant number (of digiboxes) are faulty."

Am I on the right track?

I would say so. I would personally use the plural. The number isn't faulty, digiboxes are.

Since it is one significant figure, `a` will be used here.

I would say the second one is correct because we are talking about the Digiboxes.