Best compression format for PC Jukebox


I'm getting a Brick, Wavelength Computer DAC here real soon and will be using my laptop for the server. I have already saved most of my CDs for my iPod in AAC /128. I suspect I will want to save music files in another format and better quality. Will I need to purge the lesser quality files?
Should I use anothe computer...one for iPod one for server?

I've read some about Exact Audio Copy but have heard that it's a little comlicated.
Any suggestions?
HD space not an issue. I'm willing to get external drive for my Dell PC...any suggestions there?

Thanks,

MC
musicubed
Edesilva,

So EAC for CD ripping...got that.

Any suggestions for storage and playback besides iTunes?

Thanks,

MC
I'm currently encoding all of my CDs in flac format (free lossless audio codec), which usually produces files about 35% to 60% of the size of the originals for my music (your mileage may vary, but 2:1 is a safe average). Same tag support as Ogg Vorbis or MP3. A number of players will suppport flac, including winamp (if you download and install the flac codecs... can't remember the links but Google should help), foobar (natively), and the one I'm using for its organazational capabilities, wxmusik.
I hear foobar is the one for Windows boxes, but haven't tried it. Didn't like Audiostation (messed up large libraries). MusicMatch is annoying, but it seems to work. Since my mac got attached to my main stereo, haven't messed with audio and the Windows side in a bit. Keep meaning to pull down and install foobar, if merely to have something that will allow me to recover artist/album data from the directory structure.

Ben, what is wxmusik like?
Apple Lossless is not the same as AAC. Apple Lossless really is identical on playback and compresses files to somewhere between 1/3 and 1/2 original size. AAC is an excellent variable bitrate compression algorithm that can compress files down to 10% (or less) of original size.

When choosing a format for our 1,500 CD's, this made Apple Lossless a pretty easy choice for us. My wife's 20GB iPod can hold 40-50 full albums at a time, which is just fine for her.
So am I correct in understanding that ripping a CD on iTunes in Apple Lossless compresses the file size but in no way effects the sound for playback? Does ripping it into a WAV file do the same thing?

Leaving something like EAC out of the equation and assuming that iTunes rips bit perfect copies, are my Apple Lossless songs the same sound from a 0's and 1's perspective, regardless of how they are compressed?

The word "compression" kinda scares me. Does file size compression have any bearing on playback?