Someone please 'splain me

Tell me if I'm wrong, but it seems like the easiest thing to do here is to connect the older laptop to our upstairs router, and then use an Airport Express in the listening room, which would be connected to the external hard drive with a USB cable, and also connected to the DAC with AE audio cable. Then...won't all of the computers in the house be able to control the playlist/volume via iTunes?

Howard, you might be on the right track, but it seems you're envisioning the
hard drive in the wrong spot. The only thing the hard drive gets connected to
is whichever computer is going to be the music server. Before you get that
USB-S/PDIF interface built, figure out how you're going to connect your music
server to your DAC, because you may not need it.

The basic chain (before adding remote listening stations) would be: music
server (taking data off of external hard drive) --> wired or wireless to data/
spdif interface --> wired to DAC. The data/spdif interface could be a SB or an
AX or the thingy that you are considering having built. This component needs
to be in the upstairs audio room, since it will be cabled to the DAC.

Any of the three computers you've mentioned could be the server. If you used
one of your computers already in operation as the server, you wouldn't need
the old laptop. I'd assumed that a big reason for thinking about using the
laptop was so that you could also use the hard drive based system in your
audio room, but now I get the sense that that is not important.

Your downstairs PC could serve, as long as the wireless signal from
downstairs to upstairs is reliable. Or, your upstairs PC could serve. Both of
these options could be less than ideal if having iTunes running in the
background on the server would interfere with other work you are doing on
the server machine (not likely for "normal" computer work) or you
want to independently listen to music via iTunes on the two computers at the
same time (a more likely issue).

Finally, your laptop could be the server. Let's say you choose the laptop
(depending on how old it is and what version of OS it is running, you also
may have to pay attention to whether the most recent versions of iTunes will
run on it). Then, as you say, you would cable the laptop to the router, since
it's not wireless-capable. Next, comes the data/spdif interface. I'm surmising
from your comments that you're not interested in running cable from your
upstairs computer room to your audio room. So, you'd have to purchase a
wireless interface like SB or the AX (not the USB/spdif thingy you are
considering), which would connect with your DAC by coax cable in the case of
SB or Toslink (with a $3 miniplug adapter--IMO, don't listen to concerns that
this will degrade the signal) in the AX.

In this scenario, you would have iTunes running on the laptop, with the music
sharing feature turned on. Each of the other computers also could run iTunes
and, with "look for shared music" turned on, independently select
music to be played locally by communicating with the server.

BTW, the music sharing feature of iTunes is all you need to play music from a
remote machine -- no ARA or other software is required.

Under music sharing, the remote machines do not have full-featured control
of the music library. You couldn't add new music files to the library from the
remote machines, and you couldn't edit the library's metadata, which makes
tasks like creating new playlists and assigning star ratings to songs you're
listening to off limits. You would have control over the playback functions,
like selecting albums and tunes and existing playlists, controlling volume,
using shuffle, and using the Visualizer...yeah, baby.

A more advanced topic: There is a way to set up a remote machine to have
full control over the library. However, in my experience, this requires the
remote machine to be on the network via ethernet in order to avoid dropouts
during playback (and to speed up tasks like ripping new tunes to the library)
...though maybe a totally 802.11g wireless network would not have these
issues.

Hope this clarifies more than it confuses.

Budrew, and I suppose you already have streaming buffer size set to large? Wish I had other suggestions to offer...

Jayboard,
Thank you for the informative response. I'll read through it again tonight and proceed from there.
Regards,
Howard

Howard - Easiest thing from a networking and interface perspective is probably SB. Why not save the money on the USB/SPDIF DAC 'thingy' and buy a SB instead. Feed the CD/DAC via SPDIF - or try the SB straight to the preamp.

You are making this way harder then it needs to be

peace