I've used a number of USB audio devices, including the Stereolink, the M-Audio Transit, the M-Audio Sonica and the Edirol UX something-or-other that is currently hooked up. Obviously, I prefer the Edirol, which seems less buggy on my XP box and has the benefit of a coax output that goes neatly into my outboard DAC. I haven't extensively auditioned soundcards with DACs built in, but it seems like inside a computer case is a lousy place to do DAC conversion. The Edirol sounds great hooked up to my Theta Pro Basic IIIA and run into a relatively higher end system (ARC LS16-II, ARC D400-II, ProAc RS2s).
If you are going to go the compressed audio route, I highly recommend finding yourself a copy of EAC, which is shareware, and regarded as the best ripper for the Windows environment. Then get yourself a copy of LAME to do MP3 conversion. I rip using the "alt preset extreme," although others seem to believe "extreme" is no significant benefit over the lower alt preset setting. It will take a long time to rip your CDs--took me months of one here, one there to get the job done (over 1K CDs, however). Once done, I opted for an external HD to back the stuff up onto--I do not want to go through that again...
It is enormously convenient for background music, however. I'll warn you, you will also have some fun trying to categorize everything rationally... Does early Dylan go under folk or classic rock? If Dylan is folk, where do I file Townes Van Zandt? If Townes Van Zandt is country, what do I do with Lone Justice? Aie. Hurts the brain.