Someone please 'splain me

I want to set up a hard drive system so that my wife can enjoy uninterupted music as she is working downstairs. I'm somewhat familiar with the steps involved, but have several specific questions. Here is our setup:

One room upstairs:
Cable internet connection with PC connected to wireless router

Other room upstairs:
Audio system - CDP has digital input with USB-digital converter

Networked PC

1) Which 250GB external hard drive should I buy? I'm hearing conflicting opinions about what works/doesn't work with PC
2) Should I simply hook up the external hard drive in the audio room to a laptop, or....
Should we put a wireless Squeezebox on the router in the computer room upstairs, and is it even worth the expense to do so?
3) What cabling will I need?
4) Can my wife control the music from her computer downstairs?
5) Is iTunes the best music organizer for our needs?

And finally, do you think we need to install $1100 PC's on all of the CPU's? Only kidding, cable flamers...

Thank you,
I agree that Ckorody's post was a good one. I almost hate to interfere... but, Howard, yes, you would be able to control volume from iTunes running on the downstairs computer. And that's regardless of whether you have AXpress (I would assume same holds true for SB) or a laptop feeding your CDP/DAC. (Actually, AX probably isn't an option by itself since its digital out is optical and I assume your digital in is S/PDIF.)

If you go with a hard drive in your audio room upstairs and you intend to use it while you're listening there, be sure it's quiet enough not to annoy you.

There are several ways using iTunes to wirelessly serve up music files under the control of a remote computer. Probably the most obvious is using iTunes' music sharing feature. With music sharing, in my experience dropouts are truly rare. Budrew, are you using music sharing?
Thank you all for the input. Jayboard, yes, we will have an S/PDIF digital input. And I don't know if any of these applications are MAC-only specific, but we have only PC's. So it appears that the best thing for us to do is:

External hard drive into USB/SPDIF converter into DAC, managed by old Dell laptop connected wirelessly to network.

So then, my wife can control the selections as necessary via iTunes from her networked PC downstairs, right? Can she also control volume from there via iTunes, or will we need the SB for that?

Sorry if I sound confused. Despite being so close to having a grasp of this process, I am often left wondering if I'm even asking the right questions.

Thank you all,
Jayboard, Yes I'm sharing the music and in doing some research I learned that it helps if you set all the AEs to 802.11b instead of 802.11b/g (I still have one older computer with the "b" standard). That helped, but not 100%.
Hi all - Good questions, glad to be able to offer answers.

Now Howard - I am sensing a small failure to communicate.

If I get this right, some helpful soul is modding your CD player so you can access the built-in DAC. I assume that this is either a truly killer megabux CD, or a truly killer minibux deal. Not to rain on your recycling scheme, but IMHO it doesn't make a lot of sense any other way.

At any rate in this model the slick solution is to put the USB connection right in the CD player and have him jumper right in to the DAC. You can read Steve Nugent's stuff - he posts as audioengr on AAPC, and the sole proprietor and wizard at Empirical Audio. He does this kind of stuff all the time, in fact I give him credit for inventing it.

The new problem that is revealed is that you need to get from downstairs to upstairs with the USB output from her laptop - this is assuming she is running iTunes which would be her management environment. I believe that Airport Express will do it. I have not fiddled with it so I would suggest you spend some time on the Apple site. If there is an Apple store near you, go see the helpful boys and girls who man the Genius Bar - they will know.

Failing that I guess you could set up Apple Remote Access and or Timbuktu so she can drive iTunes running on the upstairs computer from the downstairs one - only plus here is that you would be hardwired from the PC to the CD.

SB is an Ethernet device and will not work in this model since it outputs SPDIF and analog, but not USB.

The other choice is a USB cable run, there is a very tweak new optical USB cable that goes long ways and supposedly sounds fab. But talk about trouble, now you are running wire through the house...

But really - unless this is a flat out drop dead CD player I am not sure what you going to get back for your money... and you are going to be locked into that DAC - betcha you can get a SB for less money and not need a DAC at all - you sure as heck don't need the CD player for anything...
Thanks again for the response. Yes, that helpful soul (I like that!) is Alex of APL Hi Fi. We recently 'downgraded' from his modded Denon 3910 to a modded Marantz 5400, and we're quite happy with it. He will add the digital input for a modest fee, so the cost & pragmatism are not at issue for us.

What is now an issue as that I set up the older laptop in the listening room, and it apparently has no high-speed USB connections for the wireless adaptor. We had it running with DSL with an ethernet cable, but that won't work if we don't have a modem in that room. I'll have to call the cable provider and see what it would cost to hook up the line in there.

Thanks for the suggestion on the Airport Express/Remote Access. I think there is an Apple store nearby, so I'll go talk to them there geniuses. :-)

Again, I really appreciate all of the help.