What do I need to use my PC as a music server

Should I buy an external hard drive at least 300 GB. Then what, Install a program like Itunes to organize. Does Itunes also convert your CD's as well as anything you might download from the internet to the hard drive? How do I get the music from the hard drive to the Pre amp? From what Ive been reading using a sound card isn't the best way. My pre amp is not digital, it is a MCintosh C39, analog connections only. I'm starting from scratch so maybe some suggestions on what I will need. I went to comp USA for some help and they told to use creative sound blaster to go from PC to pre amp. If someone can tell me what I'll need by product name (so I know what to look for) I can see what the cost will be and if it will be worth it. I read that the sound from the hard drive to the Pre amp rivals that of a CD player in the 5K to 10K range. I know that some manufacturers are starting to make music servers, is using your PC cheaper, better or both?
To back up what I Put on one hard drive, I'll need a second hard drive, is this correct. If so is it easy to do?
Yes, that's correct, Bodine, a separate hard drive for backup. To be super safe, you could keep the backup offsite somewhere when you aren't actually performing backup operations. I don't do that, but...can't argue with the concept. You can perform backups by just copying files from one drive to the other in Windows or whatever OS you're using. Or, you can use special backup software. Can be a little fiddly to set up, but when you run it, it will automatically figure out what's changed since the last backup and then back up accordingly. I use SuperDuper! and Retrospect Express on my Macs...don't know what's available on PC side but no doubt plenty.
I use this, http://www.xitel.com/product_phfl.htm , to move music from a PC to a sound system. The Xitel Pro offers digital hookup which is nice for a 60' run to a DAC with no voltage drop. My ARC converter handles three inputs, so one can be from the computer, one for a Fostex CD recorder and one for a Sony ES CD player. I haven't gone to an additional hard drive for storage.

Itunes will convert your CD's and downloads from eMusic, but not convert from Napster. Look at Napster for downloaded playlists, your or theirs, that are included in your monthly subscription.

The Napster mentioned is not file sharing, it's purchase or download, and it's a huge resource.
There are two kinds of software used for this. All you really need to do is "Synch" your primary and your backup folder based on date. What this means is that the application will compare the directories of the two hard drives and then copy only the files added since the last update. This is much easier to set up and the software is generally less expensive
Wagzel, the xitel looks interesting as an option, although I'm leery of anything that "bundles" 30 feet of three different kinds of interconnects. Do you know if it maintains the 44.1 kHz sampling rate like the M-Audio and Waveterminal, or converts to 48 kHz like the Edirols and some others?

Back when I used a M-Audio with a long stretch between the PC and the DAC, I found substantially better sound using a long USB run (using USB repeater cables, not standard USB cables) and a short coax run instead of a short USB run and long coax run. Don't know how yours is set up, but if its the latter, you may want to experiment.