Good DACs for Apple Airport Express? Or receivers?

You have the right idea. Get the best receiver you can afford that has an optical input, get a mini toslink optical cable and your iTunes will sound much better. At least you have ripped your CDs into Apple Lossless, good job. Make sure you turn off "sound check" and "sound enhancer"....and let the tunes flow. Keep me posted as to your progress.

I plan to run a similar setup for my office. I've spent countless hours looking and researching for some older quality gear that I can use for an inexpensive office system. My conclusion is that an older HT receiver is really quite a value when you consider that it will have a tuner, DAC, preamp, and amp. Another handy feature of a HT receiver that might be helpful is the built in crossover, usually at 80hz. I would think you should be able to find a variety of older quality HT receivers for $350 or less.

I believe Music Hall made a two channel receiver that included a built in DAC but it also will most likely be beyond your budget as well.

If you already have a decent receiver and speakers, then I think purchasing a DAC is a good idea. The Musical Fidelity V-Dac is a popular one that comes to mind that is within your budget although I've never heard it. I have a Monarchy Audio M22 that I really like but it might be a little beyond your stated budget.

Take a look at the Logitech Squeezebox Touch. While it may not be the ultimate in sound quality, it is the ultimate in convenience.