I agree that it generally comes down to a balance thing, based on budget, needs, etc. As NotoriousBIG_PJ stated earlier, he's not going to get a non-portable source until he's done with university, so I don't know that I'd do him any favors suggesting a Meridian as his source. As kelly stated, however, I don't know that I'd recommend he buy that much fancy gear to follow it either.
Having sold Linn gear as a college lad many years ago, and being a hi-fi enthusiast since before some of you were born, I guess you could say I still generally believe in the traditional "garbage in, garbage out" adage (older folks like me like to use old adages), so I'd be more inclined to acquire what's at least a moderately good source before I attempted to spend too much downline. Upon reading this thread, that exact same example (Vertigo and his first set of Stax headphones powered by MP3s/soundcard) came to mind.
At the hi-fi store I worked at, we did some interesting demonstrations for customers. In one we performed quite frequently, we'd hook up a Linn LP12 as source to a certain combination preamp/amp, and then to a pair of smaller, quite-inexpensive Paradigm "bookshelf" speakers on stands. Then we'd change two things -- switching the turntable to a Dual or even using a Philips CD player and switching the speakers to Vandersteen 3's or Linn Nexus or even higher-end speakers -- and ask the customer which they liked better. The better-sourced rig with the less expensive speakers would "win" more often than not. Of course, if you then left the Vandies in as the speakers, and put the LP12 back in as source, then that invariably topped the Paradigms by a healthy margin.
Of course, this could be argued either way, and it often is until the cows come home. And either position could be made valid by assuming absolute and total crap on either end of the stream. But I'll always stand by my belief that at least a moderately good source is needed before one can start evaluating the other stuff downline. And it's always best to go for a more balanced approach based on your budget and needs than it is to go balls-out on only one side of the stream.