Best Way to Upgrade Digital

You absolutely can rip files to the external hard drive.  You just designate the HD as the ultimate destination for the files to be stored.  If you decide to go that route you need a ripping program such as dbPoweramp or Exact Audio Copy.  Make sure that your computer has enough USB ports to be attached to the Optical Drive and the HD simultaneously.
  I used an Apple Optical Drive for a while.  It’s fast but it did make a few errors here and there.  I now use a Melco Optical drive but it has to be used with Melco HD and Player and that is beyond your budget but the rips are pristine.  If you keep your current DAC and Node then you have a lot of budget to spend on hard drive and ripper.  You want to do the rips well, particularly if you are discarding the CDs afterwards .  You may want to investigate the computer peripheral market to see what the best optical drives are
  As far as HD go, if you decide that you might be playing the files in more than one system, then you might want a server (Network Associated Server, NAS), but if one system is it, then a simple HD will suffice 

You want to do the rips well, particularly if you are discarding the CDs afterwards .

I've thought about what to do with my CDs. If space was at a premium, I would store the discs in CD binders in disc pages, or some method, and ditch the jewel boxes. I'd keep the liner notes. I could probably store all 600+ CDs in 2 book boxes, but I would have them as backups or to re-rip. For now, they are in a wall rack that holds about 800 CDs.

Exact Audio Copy EAC. FREE!
A little setup is required and once you work out the naming conventions you want your music ripped to, you simply lookup the inserted disk on the online database, it fills in the names of tracks without the need to type, select the album cover and go do whatever you want and come back in 10 mins.

It has built in checking of data integrity and checksum, if you're not getting 100% perfect rips, you can polish the disk for another rip of just the songs and write over the imperfect rip.

I use a laptop, rip new discs to a USB stick and drop in into my server when I am ready.

You might want to rip the ones you want to listen to most, and while you're having a listening session, do a dozen every couple of days, most enjoyable to least enjoyable?

“HD Quality “ as used by the streaming services can be confusing.  Many of them are using the term for Redbook CD Quality recordings.  Amazon and Apple are particularly guilty of this.  Audiophiles think of High Resolution as 24/96 minimum.
Would I rather listen to a 24/96 Qobuz file than a red book CD from my collection?  In general, yes, but not all HD files are truly High Resolution…so Buyer Beware 

Keeping your CDs is of course fine. Liking the ritual to play, or copying them to a hard drive. The pursuit is for enjoyment in any way you choose. But make no mistake about it, there is no similarity between vinyl and CD discs. CDs have a set maximum fidelity as @jw944ts points out. Vinyl and streaming offer significantly greater sound quality.