gooomz -
I am running a Slim Devices Squeezebox (SB3) and streaming FLAC (lossless) files from my computer's hard drive.

You can either stream over wifi (built into the SB3) if you have a wireless router, or hard wire an ethernet cable (which is what I do).

I programmed my Harmony remote so that it controls the SB3.

As for digital audio output, the SB3 has both coax and optical outs. I run my coax ditital out to an external DAC then into my preamp (at least I did till I sold my old stereo - in transition right now).

My parents actually bought 2 of them and introduced it to me a couple of years ago. They are quite amazing, and a lot of fun. You can actually sync them up if you wish.

The one catch to enjoying music off a hard drive is that you get your tags and format consistent/correct. I've spent hours and hours organizing my library so that I have consistent Genres, etc. My parents have a mess in their library, so it is a bit more difficult finding what you want. They have many forced playlists that they have created, which is not as efficient as sorting by tags. I hear that itunes has great software for this, but I used "tag and rename" for tags, along with "exact audio copy" for ripping.