Mac to Stereo System

I have a nice stereo system in my study. I'm also a Mac G4 user. I have an unused Airport Express.

For most of my listening pleasure, I use a modded SACD player going to an integrated tube amp. I would like to play my regular CD's through my computer (iTunes). Using Airport Express I can play iTune files (mostly mp3's) to my stereo system using RCA cables from the Airport Express to the integrated amp.

Now I want higher fidelity. I can copy my CD's to an external HD. Is this best done in iTunes using Apple Lossless? I would then like to bypass my computer DAC and use an external DAC. DAC suggestions? How do I make the computer to external DAC connection? Can I use Airport Express using the digital cable connection? Is it better to use a USB wired connection? How is this done?

Through searching I'm putting this together, but the information is scattered. Can someone provide step-by-step directions of the equipment and process needed for high quality audio play? Thanks.

For going into an external DAC, I have and like the WaveTerminal, which is USB and works as soon as you plug it in.
You'll find a lot of Audiogon threads on this and related topics of playing music on a HD through your main system, so I won't try to describe what the more technologically savvy Audiogoners have to say about this. I am using an iMac (G4, 1.25Ghz), a LaCie 500gb Extreme Big Disk, and the AirportExpress to play my iTunes playlists. The AE is hooked up via the toslink output to the digital input of my MF Tri-Vista player, and I find no discernable difference between the original CD played through the MF and the same music imported in Apple Lossless and played through the AE and MF used as a DAC.
Addendum to my post: I tried to hook up the AE using an ethernet cable instead of going wireless, but no luck--you need a dumb ethernet hub which I never could find (not being made anymore?). So once you have installed the AE card in your computer (very easy for even the most mechanically challenged person to do), you install the AE software on your Mac, plug the AE in to a wall outlet next to your main system and connect to your DAC via digital input (you'll need the connection kit from Apple for this), click on AE as the speakers to play (lower right corner of the iTunes screen), and you are in bidness my friend!