Streaming, Apple TV, Tell me why not.

Apple TV outputs 48kHz while CD rate is 44.1kHz. Translation between two affects the sound. I use AirPort Express at 5GHz - no dropouts. 5GHz is much better for wireless because is not as common as 2.4GHz(Bluetooth, Computer, Microwave, Cordless phone etc), has a lot of channels (23 vs. 3 non-overlaping channels) and penetrates walls poorly - not important when router is in the same room but greatly helps to reduce outside interference.
Airport Express has decent jitter (258ps p-p). I use it with jitter suppressing Benchmark DAC1. Even better solution would be to get reclocker between receiver and the DAC. AirPort Express is limited to 44.1kHz but pretty much all my music is 16/44.1 Higher bit rate or more resolution might be better but only if music came from original master tapes and is not upsampled 16/44.1kHz (often the case) that my DAC is doing internally anyway.
Beauty of wireless connection is that nothing before receiver makes any difference. Playback program, computer speed, amount of memory etc. are not important since music is sent as data without timing. Timing is recreated on the other side of the bridge. As for Raid - I prefer just simple backup (have two). Simple backup, unpowered, won't fail, can be stored at different location (fire, theft etc). I keep one copy at work. Mirroring Raid is nice if you change data often but in case of virus or controller failure you might loose both copies. Another option is to use, if you got MAC, Time Machine for backup (but it will give you only one copy). I would keep HD off - it will automatically create new backup when powered.

I'm not sure what compression to ALAC has to do with AirPort Express sound quality. Airport doesn't convert to ALAC - it is done in Itunes. Airport receives ALAC data in packets and using its own clock outputs S/Pdif stream. At this point the only think that counts is the jitter and it is function of clock stability on the Airport Express - it has nothing to do with formats or conversion.
258ps p-p is a little excessive since pretty much everything above 50ps p-p is audible but in spite of other claims Benchmark does incredible job suppressing jitter. Jitter is basically noise in time domain. I don't hear any evidence of noise. If anything sound is too clean. Situation is different on AE analog outputs where effect of jitter are very audible (jitter measured by Stereophile 2000ps p-p)

http://www.stereophile.com/digitalprocessors/505apple

Steve, I don't question your expertise but perhaps something else was wrong. According to test conducted by Stereophile AE is bit perfect.

"Some audiophiles have dissed the AirPort Express on the grounds that its digital output is not bit-accurate. However, I found that this was not the case, that the data appearing on the AE's digital output were identical in the original file. To check this, I compared a WAV file with a duplicate that I had captured on my PC from the AirPort Express's S/PDIF output. I used iTunes on my PowerBook playing a version of the file encoded with Apple Lossless Compression to feed data to the AE. The files were bit-for-bit identical, proving that the AirPort Express is transparent to the music data (as is ALC, for that matter). "

Perhaps firmware had problems previously.