chris,
if you're ever 'daahn sarf' then you're more than welcome to drop by and have a listen to my pc audio system. i'm based in bedfordshire - pm me if you want to arrange something.
assuming a decent spec pc (3+ ghz processor 512+mb ram, good video card - radeon or gforce preferably and the usual compliment of USB (Universal serial bus) and networking sockets)
basically for music - if you go the squeezebox route the most important feature will be the size of the hard drive at least 250+gb if you are going to be using lossless compression with the facility to add more hard drives as time progresses.
you'll also need a cd or dvd rom drive to rip the cds but these are all but standard now.
if you don;t go the squeezebox route i can;t really comment but you'll need a good soundcard - i belive there are some decent external USB soundcard availible. also if this is your preferred route a wireless keyboard and mouse would probably be best too as no remote control!
you'll also need a crossover cable to connect the squeezebox to the pc. and some cables to connect the squeezebox to the hi-fi.
software - best pc ripper i've found is Exact Audio Copy (eac). this can rip to a variety of formats mp3/ aac / flac / etc. or you could just use itunes but i'm wary of their flexible licensing agreement that can change at any time. if you need an mp3 codec, lame is generally regarded to be the best.
that should get you started.
cheers
julian