I've just entered the computer audio world, using a wireless squeezebox to deliver music to my home stereo from my PC. I'm a big fan of this approach. My comments obviously refer only to this type of approach, rather than computer audio in general.
If I use a wireless squeezebox, then I can listen to music well removed from my computer: i.e. no computer noise. Alas, I have to worry now about my wifi arrangements - but that's all fine if I choose the right router, and the right telephone, and never use the microwave (it's not really that bad...except for the telephone thing). Alternatively, I can use a long ethernet cable, and still distance my listening from the PC.
I can also use some sort of networked storage arrangement, so that I don't have to have a whole PC fired up - slim server and my music harddrives can all be attached to this. And as I'm not using this server for any downloading etc., it's pretty safe from viruses etc.
The squeezebox is amenable to modification at relatively low cost, allowing excellent audio quality.
Obviously, I need to back up my collection. And this backup needs to be stored offsite. But that's okay too, as I can now take my whole music collection to work and claim that it's a safety precaution.
If I have an appropriate handheld device with wifi capabilities, I can organise an extremely user-friendly and totally portable user interface for controlling the squeezebox (an improvement over the very simple and reasonably user-friendly interface provided by the squeezebox itself with the remote control), and can even arrange to have album art and liner notes etc. displayed on the handheld screen as a really convenient way of carrying around all of the "nice" stuff one might like about having CDs and CD cases around.
Problems? Well, things go wrong with my computer much more frequently than things go wrong with my CD player. Perhaps this would not factor in if I were using networked storage, or a dedicated music server.
I obviously have to rip my whole collection to a hard drive - big PITA. This is even more of a PITA if I care about generating excellent digital copies, as ripping with something like EAC can be slow. On the bright side, though, the EAC-ripped version on my hard drive is almost certainly better than the version this is read from my CDP/transport and then sent to the DAC.
Presuming I want high quality source material, I'll not be able to compress the files much. That means I need a lot of storage. I think I fit around 600 CDs in FLAC format onto a 250GB hard drive. Fortunately, hard drives are getting cheaper all the time. So even if I need two 250GB hard drives (one for back-up), and need to replace these as a matter of course every two years, it will probably cost less than $300 this year and significantly less in two years time, and less again four years from now...
Also, I no longer have to have 600 CDs stacked anywhere - that's a lot of space saved. Even having stuck all of my CDs into slappa cases, there's a lot of space saved by sending the CDs to the garage. Furthermore, by setting the sharing rights on the music server properly, I could have access to my whole music collection ANYWHERE, as long as I have an internet connection.
There are teething problems that one doesn't associate with using a CD player, though: setting up software, making sure hardware is configured properly etc. And this isn't necessarily a one-time deal. Each time you change hardware, you potentially have this problem. For suckers like me who are stuck with a windows environment, you're just waiting for the service pack update that is automatically loaded onto the PC that will completely disable the whole audio system. But there are upsides on this level as well. Slimserver is opensource, and is continually being improved and plug-ins developed - the range of functions is expanding like crazy.
I'm not sure that the squeezebox makes so much sense if you intend doing all of your listening while at your computer, as most of the cool functionality is available at your fingertips while you sit at the PC, without having to deal with slimserver (so, I don't imagine I'll incorporate a squeezebox into my office system. More likely, I'll use a USB DAC). But if you're simply looking for the most cost-effective, and widely functional transport for an audio rig, then I can't imagine finding anything better than the squeezebox.
Chad