Were you considering using the Touch as a standalone player? Currently there is a bug in the software which will not let it operate standalone unless it has an internet connection (either WiFi or Ethernet). Supposedly this will be fixed soon. The description on Logitech's website claims it can be used standalone, which it cannot without access to the net. Of course, if it has net access, it can directly tap into internet radio, which works well. It will also run (pay) apps like Pandora or Last.fm.
With only a 32GB SD card it should fly. I've never used the card reader, so I don't have personal experience with doing it, but I've heard that it works well. The Touch is a solid & heavy-feeling device. The built-in stand sticks out and will not fold, so it is not really designed for portability. I use mine in my office and it doesn't move. I occasionally use it at home too, hooked into the Squeeze network (which is run off of a Windows Home Server BTW). The internal DAC is pretty good, so I simply use the audio cables to my Mapletree headphone amp in the office. At home, I use a Bel Canto DAC that I borrowed from a friend, into a vintage Eico HF-81 tube amplifier from 1959. When I went to the White Plains meet last November, a couple of people were using the Touch as sources, and those systems sounded extremely good.
As far as other network players with digital outputs, I think there are a bunch of cheap Upnp media players that are oriented to video playback, some of which have digital outputs (usually via HDMI). I do not think many have been designed specifically with SQ in mind. I have heard that there are a number of high-end audio manufacturers who are introducing/have introduced new network media players which might be of interest. For instance, the Cambridge Audio NP30 looks interesting, as does the $$$ players from Ayre and McIntosh.
hope this helps!