Need DAC suggestion

Look into the Furtech ADL GT40 USB DAC. Reviewed by Malcolm Steward in the new HiFi+. I think it's around $500. A bit more than you wanted to spend but at this price point your options become less and less.

I have a great DAC to recommend but it's not a USBish device so I will not mention it.

However, I would strongly recommend against depending too much on USB, because you will in turn be depending a bit too much on how your computer handles that situation. It's the sort of thing that may require revisiting after a couple of years.

I use a squeezebox and I really like it. It can actually handle the iTunes situation better than their official statement suggests, but the problem is that as soon as Apple changes its mind, you might get screwed. That actually happened some years ago when they decided, for no reason other than their own profit structure, to take FLAC support out of iTunes. The squeezebox provides its own server instead, which is much more robust (as you'll discover if you move your files out of their current default directory, for example, and iTunes has to find the music all over again and it's an ugly process).

Perhaps a visit to the slimdevices forums will give you an idea of how your situation would be handled with the squeezebox.

However you solve this issue, you do have a bit of work ahead of you, but when you are finished you should have an excellent long-term replacement for the plastic discs of yore. Good luck!

Thanks guys. Devilboy, I was hoping to get a DAC that featured 24/96 USB input and a digital coax input, so I can connect my computer and my Denon changer.
Trebejo, I did move my library off of my hard drive and onto an external drive some time ago. It was kind of painful. iTunes is definitely not one of my favoriter pieces of software, but I can't live without my iPod at work, so...I guess I'm stuck with it. I suppose since the music is on an external drive I can use different software to pipe it into a DAC, and just use iTunes to manage the iPod?

I think the Music Hall 25.3 has digital coax inputs and USB 24/96 inputs - but its a little pricey. Could be I'm just wishing for features that don't exist at this price point.