@TLS guy: we'll just have to agree to disagree on this one. I like computer playback systems.
To the OP, if I were setting up a new system for computer audio playback and I could go a bit over your $500 budget, I'd get a squeezebox touch which runs around $300 (sometimes you can get it for a bit less):
Amazon.com: Logitech Squeezebox Touch: Electronics. I'd get the Touch rather than a CD player. The Touch sounds great through its analog outputs, it does internet radio well, and makes computer playback a breeze. Just add hardware of choice.