My 2 cents,
I like what Drobbins had to say. I haven't tried that approach. I do think however that the whole "jitter" discussion is a bit overblown. Jitter might have been an issue years ago, but I don't believe it's still as relevant today. Most DAC's over a grand can handle jitter with aplomb. I would assume that jitter would become very recognizable with vocals, since we all know how human voice is suppose to sound. Even the un-trained ear can pick up anomalies. I get none of it with my setup.
I have a RME digi pad connected to (via coax) a Bel Canto Dac 2 connected to a tube integrated amp. I'll take the convienence of having thousands of songs and albums at my fingertips, while sacrificing some fidelity (how much is debatable) to the CD changing ways anyday.
Having said that and after reading countless technical discussions on jitter, usb, coax, dac's and computer as source in general, in my opinion it comes down to this: computer as source can sound very good, but it's not there yet. Meaning, if you compare it to the world's best cd players (ie. Linn), computer as transport won't sound as good. To use an analogy here, the Linn cd player is a Formula 1 car. Is it better than a Mercedes S500? If speed and cornering is what you're after, you bet it's better. It won't have the nice climate controlled seats like the Mercedes S500 nor the smooth ride for that matter. The Mercedes is no slouch in cornering, but it can't beat the F1 Ferrari. So there... that really is the gist in my humble opinion. To take the analogy further, I think you're looking for climate controlled seats (Mercedes) and speed and cornering of an F1 Ferrari. That's going to be tough to find. Here are a few things that improved my sound.
Media: Mp3's won't do. FLAC, AIFF, APE and Wav is what you should be listening to.
Hardware: The computer needs to be assembled as an audio device from the start. Store bought systems, (especially if they're more then 3 years old) won't cut it. The RME is a good card because it's drivers bypass the windows own kmixer which mucks (a technical term ;) up the sound. Try reading up on "Lynx" which is another manufacturer of high-end sound cards
Software: The front end software is important as well. Foobar2000 is the most audiophile friendly player (but not easiest of most user friendly to set-up)
Last point. The lastest fad of hyping USB as the "solution" is debatable at best. Maybe it's cleaner than coax (SPDIF), then again maybe it's not. I've seen highly regarded DAC manufacturers ripped to shreads in forums. Their USB claims were simply ignorant or plain incorrect. Check out diy audio forums or headfi for those discussions.
Last but not least, you can throw money at your quandary, but I'd be carefull there. It might just leave you a little lighter in the wallet without any meaningful improvement.
Good luck!