Using Airport Express/AirTunes.

The constant rebuffering thing with the Touch may be your router..... I had that very same issue and changed the settings in the router... allowing more bandwith... and no problems since.

I have an AE connected to my integrated amp utilizing a monster cable with RCA connection. My AE is set up through an existing wireless network . I downloaded i-tunes from the web and it recognized my AE immediately. Yes the AE has a DAC but only does 16/44.1 and yes you can by pass it using the optical out into a DAC.

Chuck

Airport Express has, according to Stereophile review, decent low jitter optical out and less then perfect DAC (what can you expect for $99). It has two problems: Limitation of 16/44.1 and lack of clock between songs resulting in a loss of few seconds of next song when DAC is slow to sync(crossfading in Itunes being remedy for this). My Benchmark DAC1 doesn't do it and all my music is 16/44.1 but when higher resolution downloads will become more popular I might switch to Apple TV (that costs the same) or similar. AFAIK AE uses ALAC format for transmission - that is my storage format. Remember during installation to "join existing network" instead of creating separate network. Also figure out frequency of your microwave (manual) and switch to channel far away - unless, of course, you can use 802.11n that operates at 5MHz. Unfortunately I have old Mac Mini that does not support it.

Streaming either wired or wirelessly from a Mac to the Airport Express, then via the optical mini-Toslink jack on the AE to an optical input on a DAC works very well.

That does, indeed, bypass the internal DAC of the AE and there is no impact on Apple Lossless files.

The usual recommendation is to use a glass Toslink cable, I have one I bought from an audiogon member who no longer sells them here but there are other sources, I've seen the Sonicwave cables sold on Amazon recommended highly.

If you're going to stream wirelessly it's definitely worth ensuring that both the Mac you use and the Airport Express you get have 802.11n capability, rather than the older 802.11g standard. Newer ones all do and that helps ensure you won't have interference issues.

Sfar, I agree 802.11n is the best option since I have dropouts with 802.11g (on occasions only). 802.11n is using 5GHz (5MHz in my previous post was a typo) - less polluted band far away from microwave ovens and cell phones.