what is a lazy old audiophile to do?

If you want lazy - take a look at my system. I buy a CD online - it arrives in the mail - I open the packet - I throw it in the changer and that is it. Done! CD stays preserved in pristine condition and no messing around with "importing" it to ITunes or some other music server. I play music from the listening position with a wireless keyboard and trackball.

Soo... no one seems to have stated some of the obvious...

First..
Your iMac has an optical toslink out thru the same mini jack you are using as a headphone output. You can purchase a very nice glass toslink mini to std toslink connector cable from Van den hul.I am running this same configuration from a minipc.

With some configuration on the iMac you can disable any of the digital preprocessing and get a pure bitstream out to that toslink connector. Connecting that to a dac will give you very nice audio. I'm using a Bel Canto e.One Dac3. With the toslink out on your iMac... u have a ton of options for Dacs. You're not limited to Dacs that have a USB input.

btw... a headless mac mini would have given you the same solution if you are really using this as a dedicated music server.

The second thing that folks have alluded to is that you need to get the best possible copy of the disk onto your computer. The first part of that is to make a copy (with lossless compression or no compression) using software that will not just take whatever the drives hands it, but rather understands that read errors can occur, and it should try to correct for that by re-reading etc. EAC (Exact Audio Copy) is what i would recommend. Free...and easy to use after a little research. I have that setup to rip a .wav, and an ALAC (apple lossless) copy...so i can put it successfully on my ipod, and have a digital archive copy to convert to whatever other format i would ever want to. Disk is cheap... :-)

The other part of getting a good copy is to have a drive that plays well with EAC.... again to give you the best possible copy. You're pretty much locked in there with the iMac unless you choose to buy an external drive.

Overall there are companies/services as well as standalone very expensive solutions (Linn) that go out of their way to get you that bit perfect copy of the original. (just thought you should be aware of that)

Hopefully that gives u enough to be able to research what makes sense to you.

Thank you very much for this response. I didn't even know these things exist. Apparently there are also converters that can be put between the computer and the DAC. Now I need to find out which DAC ... will check out the Bel Canto and others. Sites I have seen seem to say that the stand alone DACs will produce better sound than the sound cards (ATI, Nivia) installed with some computers - maybe because the computer is a "noisy environment" or maybe because the sound cards are intended more for sound effects than for music. Apple makes an airport device that apparently can act as a DAC, but I have no idea how good it is. My sense so far (after several attempts to find anyone at Apple who is knowledgeable) is that Apple doesn't care much about this stuff. Seems kind of short-sighted.

My sense so far (after several attempts to find anyone at Apple who is knowledgeable) is that Apple doesn't care much about this stuff. Seems kind of short-sighted.

Apple is quite highly regarded in audio. iTunes has been extremely succesful for them. So has the iPod. You could not be more off the mark about Apple. If anything it is the major labels and Microsoft that are short sighted...

The lazy solution is to use a USB DAC, iTunes and stick with the Mac. The sound quality is limited only by the DAC.

As mentioned before, make sure you rip your CD's using .wav or Apple Lossless (takes less space than .wav).