Hi ZT, sorry for the delay in getting back to you, pesky work!
1. I have an old Mission dac5 DAC which I got for 15 quid, and I think it makes a big difference to the sound, compared to the analogue output of the M-audio, although I haven't bothered doing much of a comparison. Generally, an external DAC will use better components, have a better power supply, and will be shielded to a greater degree. The outputs on the M-audio are still better than most sound cards I've heard, and certainly better than any onboard sound cards.
2.The headphone output is pretty good, although I don't do much headphone listening these days, and I usually use the headphone socket on my NAD3020 amplifier anyhow
3. I find computer noises annoying when I'm listening to music, especially in a quiet environment, so getting that hard drive as far away as possible is important! I don't know how long you can run a Firewire cable, but I'll bet someone out there does... Wireless seems to be a great option, people are reporting that there's no loss in quality - which seems fair enough, because there's no loss of data across a wireless network (if you send a file over a network, it's going to be the same at both ends, right?)
I notice you're in New Zealand... my housemate and another friend are going there next month - what's the weather like at the moment??
Fickle-Friend - that certainly seems like a great setup! In a few months' time, when I move to a larger flat, I'll be joining my mini up to my 2a3 and Lowther setup, I'll be interested to hear how it sounds - I'm glad you're getting positive results using it in a high-end setup!
Andrew