I just got my 160GB ATV 2 days ago...so far, so good. My current library of ALAC files is relatively small (only ~120GB), so I have synced all my music to the ATV hard drive, and I stream movies that I convert w/ VisualHub... I'm a Mac fanboy, so to speak, and am very happy w/ this setup. I'll be looking for a DAC (probably the DL III as others have suggested) when I switch to separates from my Cambridge Audio 540R receiver.. I think the 540R does post-processing regardless of whether an analog or digital input is used, so getting a DAC now would be pointless..