Duanea,
There are probably a hundred threads which answer your questions on Audiogon. Just try a little harder to find them. The short answer is yet, even the CEO of SimAudio has admitted that a hard-drive based system with DAC can outperform his top of the line CD player. I would begin looking at a number of USB DAC's (Benchmark, Bel Canto, etc...) and a MAC Mini computer with external hard-drive. Going that route you could even use an iPod touch to access the music on your hard-drive.
There are probably a hundred threads which answer your questions on Audiogon. Just try a little harder to find them. The short answer is yet, even the CEO of SimAudio has admitted that a hard-drive based system with DAC can outperform his top of the line CD player. I would begin looking at a number of USB DAC's (Benchmark, Bel Canto, etc...) and a MAC Mini computer with external hard-drive. Going that route you could even use an iPod touch to access the music on your hard-drive.