Septemous, I don't know Extreme. AE receives in 16/44.1 in ALAC format (so I've heard) thus I keep my hard drive music in ALAC format. It goes by short glass Toslink to DAC. Toslink is usually worse than coax but it is system dependent. In addition Toslink breaks groundloops.
Reducing jitter (noise in time domain) is the most important thing. It can be done but it is not easy. Better method is IMHO is to either strip music of timing and recreate it again or to use reclocker, or both. Reclocker will also reduce jitter from the other sources like transport. Problem with noise created by jitter is that it is proportional to loudness (no noise without music) and detectable only by lack of clarity, harshness, poor sound-staging etc.
Reducing jitter (noise in time domain) is the most important thing. It can be done but it is not easy. Better method is IMHO is to either strip music of timing and recreate it again or to use reclocker, or both. Reclocker will also reduce jitter from the other sources like transport. Problem with noise created by jitter is that it is proportional to loudness (no noise without music) and detectable only by lack of clarity, harshness, poor sound-staging etc.