Someday I'm going to have to add pics of my PC based rig...
I'm in the Marco-camp, in the sense that I have a PC with a USB audio device (Waveterminal U24 also), which connects to a dCS Purcell, dCS Delius, then onto the preamp. My PC is a little (mebbe 2"H x 8"W x 12"D) serener fanless PC. Its got a NEC spinpoint drive, which make it one of the quietest PCs I have ever heard (really, "not heard"... its dead quiet). The spinpoint drive isn't huge--80GB--so the serener is connected to my home ethernet and accesses a Buffalo terastation stored in a closet. The Terastation is 4 x 250 GB drives, configured as RAID 5, so its pretty safe. If I blow up two drives at once, guess I'm reripping everything, but that prospect seems pretty minimal.
I do all my ripping using EAC in secure mode, which seems to be the best option for getting bit-perfect copies. I use a little script called iTunesEncode to interface between EAC and iTunes--EAC rips the wav file, gets tag information from CDDB, and passes it all off to iTunes to have the file converted into Apple Lossless (ALAC), with tags. I do have to add album art separately. I will typically then switch the iTunes library and convert the ALAC files to 128kbps AAC files for iPod use--means they are stored in a completely different subdirectory.
For controlling playback, I use a 10" viewsonic airpanel, a wireless touchscreen that has one trick only--it acts as a remote desktop under the PC RDP protocol. So, I can sit on the couch with the 10" touchscreen, see the iTunes interface, and select songs that are then pulled off the terastation by the PC and sent to the stereo.
The little serener is also sufficient horsepower to run slimserver, which is sort of integrated with iTunes. Slimserver is the "always on" side of the squeezebox system. I've got a bunch of Squeezebox 3s in other parts of the house that interact with the slimserver to deliver audio, from the common library to other stereos.
The SB3s are hooked up to systems that really aren't all that high-end, so I can't really comment on the fidelity of those. But, my serener->waveterminal u24->main rig sounds as good to my ear as my DV50S playing the same CD run through the same upsampling/DAC system.
My only complaints are that, with 1600 CDs, over 15,000 songs (stored both in ALAC and AAC) and 400 GB of tunes, iTunes runs a little slow. iTunes is also *not* my favorite user interface--I know Apple is supposed to do good UIs, but this isn't one of the better ones. No provision for looking at album art when you scroll through your albums... No play queue you can just "add" too as you scroll through your music... Sure, you can fake some of this stuff, but... I really need a better UI.