BSA - you state the HDMI connection is 'pretty much the best way to go'. I'm looking to have a small form factor PC dedicated as a music server with an external HD (so I don't have my music committed to the HD on the PC). The typical outputs for PCs are, of course, HDMI and USB 3.0 - no digital audio, etc. My processor accepts HDMI and USB. I thought that I'd use the HDMI for the video, of course, but will there be a difference in sound quality between HDMI and USB or are digits digits? Sounds like you guys are alluding to the fact that the method which you use to rip CDs will have the most effect on sound quality? That said, will most any external CD/DVD drive rip in a quality fashion or should I look for something in particular?
ChGr
This is an operating scenario that I do every day so I can offer an opinion.
I use a Mac Mini as the source for my audio library (and video library too). I have a big screen TV that's the console for the Mac that's also attached to the AVR via HDMI.
The Mac Mini is connected to my AVR via HDMI. The HDMI connection provides both sound and video if video is present. The DAC in the AVR does the magic of conversion and I chose this setup because it gives me the highest quality signal path for both audio and video.
I don't believe I could hear any difference between a USB connection and an HDMI connection. I prefer the HDMI for simplicity and because on the AH the overall opinion seems to favor HDMI.
Will the method used for ripping CD's have a great affect on sound quality? That's an "it depends" question but the safe answer is "it might" and a couple of simple choices can insulate you from any potential "ah shits". If you choose a lossless method for storing your ripped CD's you are insulating yourself from most of the problems. If storage space isn't an issue for you, then also choose an uncompressed format as well. The combination of lossless and uncompressed will insulate you from most possible issues.
Do you need a special setup to rip your CD's? Nope, not in my opinion. I just used my iMac as the source for rips right in to my library. There are a lot of software rippers (foobar2000, Exact Audio Copy, JRiver) that will get the job done. There are fans for each. Just pick one and it will do the job. You can choose to turn on error correction flags to make sure the copy is as close to an exact copy as is feasible.
Hope this helps. I have been doing this for over a year now and its given me the best quality source sound that's available. Its also easy to use, and easy to back up.