Eeerie,
There is a pretty good (IMHO) explanation of why digital cable length makes a difference here (assuming you are using coax instead of optical):
http://www.positive-feedback.com/Issue14/spdif.htmIf the article is too technical to understand, the gist of it is that a 1.5m digital cable is able to hold the entire length of a square wave's "rise-edge" based on spdif specifications, and that shorter cables can cause jitter-related problems because of mismatched impedences and the resulting signal reflection inside the cable.
The other important factor is to make sure the digital cable you use is truly 75ohms.
If a hard drive solution is interesting to you, also check out the Squeezebox by Slim Devices (
http://www.slimdevices.com). It's only $250-$300 and works with iTunes...