How many CDs do you have in your collection?
This is a big factor since it will determine your storage needs. If you want a solution that stores your music with almost no quality loss, you'll have to stick with lossless compression or no compression format.
The real beauty of Home Theater PC (multimedia) is it's flexibility. IMO, some of its strengths are definitely indexing and data entry (ie. labeling, categorizing)
If you choose to go the MP3 route, Alot of ppl will tell you that even high sample rate/low compression MP3's still suffer from 'noticeable' quality loss therefore I recommend you experiment with recording familiar tunes first and listen to them to see what is acceptable to you.
I believe Audioholics has done some pro reviews on diff. types of solutions that fall in line with your needs.
If you are looking for a good sound card, the Creative Audigy series is pretty decent. After reading some reviews, you could buy more expensive cards and do a whole lot worst than the Audidy series...
I have about 100 CD's myself with a similar dilemna so I am quite interested to see what ppl might respond.
If I had my perfect product this would be it:
Build a Cd changer that allows to interface directly with a PC (ethernet, wireless, etc) running a sofware agent/client on the desktop that allows to identify cd via online internet databases.
That way, users with extensive CD collections can do all management tasks directly from a pc console to do all their custom playlists, categories, etc...whatever, the sky is the limit. This could all be done without having to convert any cds to another storage format. Your CD changer would also connect just like a regular changer to your receiver thereby eliminating any compatibility/upgrade issues down the road. You could even get the software to perform all the conversion tasks for your library into whatever storage format you desire (portability).
My point is: leave the mechanics in the player and put the smarts in the pc.
Any chance this exists? Instead of reinventing the wheel, sometimes you just need to improve it.
Good Luck