Thinking about Laptop system - Newbie Questions


As an old timer (listening to 50% vinyl/50% CD), all this music server stuff is very new to me, but I am somewhat computer literate. I was thinking about building a nice little laptop based music server. Thinking about either a Logitech Transporter or Squeezebox Duet with separate DAC. I have a wireless router close enough to the 2 channel system so I can go either wireless or Ethernet.
Laptop is Toshiba with 4 Gb RAM, 340 Gb HD. I would use a stand-alone HD to store music.
So, I have a few questions: Transporter vs. Duet/DAC?
What format to store music? WAV, FLAC, etc.?
Can I still use the laptop while playing music?
Any other helpful hints?

Sorry for all the newbie questions. I am doing as much research as I can before I jump into this.

Thanks for any info.
smholl
I recommend you forego the Squeezebox/Transporter route and just use a laptop, where you could choose your own software, preferrably more competent than Logitech's. You could get a Network Attached Storage to move the hard drive (the most noisy component on a computer) to another room, connected through your internet. The laptop -- or even better, fanless HTPC -- would use an external USB DAC directly to your sound system. The final component is optional; for convenience, you could get either an iPhone, or use a PDA, or one of those battery operated micro-laptops, or maybe even a good universal remote.

The laptop pulls music from your NAS music server, your phone/PDA controls acts as a remote control.

Because all hard drives eventually fail, make sure the NAS unit supports RAID.
Rakuennow- I like the suggestion of forgoing the Logitech devices, just using laptop and DAC. One problem I have is that where I use the laptop is across the room from the DAC. Would need to use a long cable. Also, my laptop has 3.5mm digital (optical) output. I could go Toslink into a DAC.
i am from the other camp and think highly of the logitech products as well as their interface. i use the sb duet to theta dac. i find very few hi rez music in my collection. it has changed the way i listen and enjoy music. as mentioned, back up your music! i lost one hard drive, fortunately it was a small portion of my music, 1000 songs or so.
another point...i have found zero difference in lossless formats or ripping tools. as a result, i chose the easiest to use which, as a pc user, is windows media player and windows media audio lossless files. many seem to think that eac and flac offer sonic benefits, i was unable to detect them in a very resolving system.
Richard - It would be much easier for my installation to use a SB Duet or Transporter. How is the sound quality of the SB Duet without DAC? Is it listenable until I get a DAC?