Need help. Music server and streaming. Newbie.

Foreraus, I went your route years ago until I bought a dedicated streamer dac in one box and eliminated the computer interface. I also got better sound. You are correct ITunes saves as AIFF not Flac....or whatever Apple calls it. I put my multi thousand CD library onto a solid state outboard hard drive and just plugged it into the back of my Lumin, which streams just about anything. If you want a simple, uncluttered solution I suggest picking up a one box unit to plug into your hi fi. Streaming is the "new" direction and I believe it’s here to stay.

For certain I am no expert in this area , but I import cds into itunes using WAV setting and error correction and find the result to be very good. I have seen online that if you have a large storage capacity that Apple Lossless Encoder is the best option

Not meaning to hijack but @tuberist what model Lumin do you recommend or have?  Been dealing w/an ailing aged CD player laser drive and about to jump ship.

I don't use iTunes, or any Apple products, other than an old iPod that I never use anymore, thanks to my phone.

I use Foobar 2000 for ripping CD's.  There are other formats you can use as mentioned.  The key thing is to use a format that doesn't employ compression and works with what you're using for playback.  I know FLAC works with the Oppo.  The others may also, but you should check.

Foeraus, I decided to use existing computer, next to my listening chair. I use WiFi in order to avoid dragging cable across the room.
Quality of digital music when delivered data is perfect (aka "bit-perfect) lies in timing of D/A conversion. When this conversion is done in uneven intervals (jitter) additional frequencies at small level are added resulting in added noise. Conversion timing can be dependent on incoming signal (S/Pdif, synchronous USB) or independent of it (WiFi, Ethernet, Asynchronous USB). Even in case of independent clock there is still electrical noise (converted to timing jitter) injected by the cable. In case of WiFi, everything depends on quality of the receiver (timing evenness). I use Airport Express, that is not available anymore. You can still get Apple TV, but the problem is that it operates at 48kHz - frequency common for TV audio. CD data made at 44.1kHz has to be approximated for the new timing. I’ve read post about loss of quality while other people claimed it is inaudible. WiFi receiver produces some small jitter on the output. To reduce it you could use jitter suppressing DAC (I use Benchmark DAC3) or suppress jitter with added reclocker.
USB seams to be a good solution as long as it is asynchronous. In such case you transfer just data while D/A conversion runs at independent timing. You have to be careful to avoid injecting electrical noise. You should select cable without power wires, if your DAC doesn’t need it. Good shielding might be important as well.

Now, ripping CDs. Itunes with necessary error correction enabled works fine when CDs are in good shape, but for poor ones it starts interpolation of missing data. CDs were designed with error correction and interpolation assuming that CDP cannot (working in real time) read the same sector many times. Itunes most likely reads each sector few times but dedicated ripping programs can do this much better. You can set number of times you allow to read the same sector or even verify that operation was bit-perfect (CD checksum). I use free XLD for Mac, but Windows people often use Exact Audio Copy (EAC).

Formats: You should select lossless format. It can be either uncompressed or compressed. Compressed will save about 50% of disk space. WAF and AiFF are uncompressed while FLAC and ALAC are compressed. WAF and FLAC are more common in Windows while AIFF and ALAC are Mac formats. I use ALAC.

I like WiFi because it makes sound quality independent of anything on computer side. Computer speed, type of HD, amount of memory, playback programs make no difference. I use computer for other tasks during playback and it doesn’t affect the sound either.

Backup: Rip CDs that you want to listen at given moment. My XLD places them in Itunes directory and I can start playing CD during ripping just after first track of CD is done (ripping is faster than playback). That way it will not be a big chore. Make backup. I use 2 backups interleaving them every 5-10 CDs. On of them I keep outside of my house just in case of theft, fire etc. Total of 3 HD gives me extra protection in case of computer failure (or virus) during backup, that can destroy two of them.