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Hi Jeff,
Outboard DAC is the definitely the way to go at this point. Try and get one that has as many different types of digital inputs as possible, including USB. By going with an outboard DAC you're not locked into any given computer or computer operating system and you can use the DAC with all different types of digital sources. A good used/new DAC with a USB input can be had for around $200 to $300.
As for the ripping, storage, playback questions. The gold standard for ripping CDs is Exact Audio Copy, a freeware program that puts everything else to shame. For storage many people use the FLAC codec, another freeware program which is a lossless audio compression program and is widely supported. For playback where audio quality is important, the program to use is Foobar2000, another freeware program which is ugly as sin, completely user unfriendly and totally lacking in bells and whistles (at least until one customizes it a bit) but enables the music to come through with the least amount of distortion.
Google and Wiki any and all of the above for more information.