to echo toms thoughts and to answer your question.
in my case i have replaced a fairly high end (to most normal people) cd player - naim cd5 / hicap with a squeezebox / dac. i auditioned a variety of very expensive cd players from a naim cdx2 to a top of the range sim audio and cec transport / dac and still went for the pc solution without feeling i'd compromised on quality. also 2k for a dac is a bit ott imho. there are solutions out there in the 500 to 1k price range which will sound fantastic. as most here already have a pc i'd not include that in the cost.
at 100 quid for a 250gb hdd, 140 quid for a wired squeezebox (both from dabs) and a dax 2 for 500 quid you've spent 750 quid on a system that will 'shite from a great height' on a lot of more expensive digital replay solutions (imho of course).
cheers
julian