Sound Card with External DAC

Data IS data, but the way how they read it are different. I would suggest you to read some FAQs about 'how cd-player works'. Shortly, when you read data CD, your drive works on, let's say, 24x speed with buffering, it has enough time to read, check CRC, and re-read if necessary up to several times. And re-tries ARE necessary, due to the nature of CD media. When you play an audio CD, your drive (except Meridians?) has only one attempt for anything, obviously no CRC check performed. The result is not 100% accurate data retrieved, resulting in jitter, which directly affects sound quality.
On the other hand, audio extraction (from CD to HDD with appropriate software: with CRC, re-reads, variable speeds, etc.) is much closer to the way how data CDs are processed, and thus a perfect copy may be obtained.

Very interesting discussion, EAC is Exact Audio Copy, done by a cool computer dude thats probably gonna sell his now-free-shareware once its perfected. I read up on his digital extracting/burning software, (its recommended in Stereophile magazine by at least 2 writers there, for cd burning,) I must add that bits are bits but what happens when you MOVE bits is a whole nuther matter. To take bits from a disc and put them on your hard drive, even with all the numerous re-checking of data that takes place does put the integrity of the original in question. However, I would think that this is the lesser of the evils. Now that the data has to be re-read from the hard drive, we have a whole nuther question. Even if the bits are exact, when the bits are sent from the HD to the external DAC, is this going to be a truer transfer than a stand alone cd player? That is the one of the questions. To me at least. Jitter, dropped bits is another question. But what about the overall musicality of the bits? Does this exist yet? Has it been distorted yet? or has this "distortion from original, true bits assemble" not taken place yet? Is it the DAC or the data stream or both as a source of distortion, is the question I'd pose. We need to establish this to get on with the comparison.

This is still a much debated question in many various forms going on in audio. I cant fully side with "bits is bits" myself. Too many experienced audio people still struggle to account for differences and resort apologetically to subjective "magical" terminologies. Alotta audio dudes still feel that these indefinable, unscientific terms are essential in order to describe the differences that science thus far can't. Tubes vs. Solid state anyone?

Talking about whether CD-ROM drives are truly accurate misses the point of computer based systems. The original question was about putting together a high end computer based system and if that's the case the CD-ROM is not important in playback since the music will be stored and played from the computer's hard disk. The role of the CD-ROM will be solely to rip the CDs to the hard disk. If properly setup, this type of computer/hard disk playback is of very high quality. Systems of this design are routinely used in recording and mastering studios.

As far as soundcards go, I recommend RME. It can be configured with optical (Toslink), RCA (SPDIF) or XLR (AES/EBU) digital I/O.

Well yes Onhwy61, but he did say, "this computer and its TRANSPORT will serve as the source...." although I agree with you, a harddrive based playback system probably would be better. It truly is an interesting topic. I am curious where the integration of HD technology with digital audio playback will take us.

Would RME soundcard give me better results than inexpensive devices like xitel or link 1200?

Seems like a waste of the RME's capabilities just to use it as a link to an external DAC. Do we have to pay that much simply for a quality link?