I think that you are wrong about this.
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Yes, you can do this (hard drive connected to your system). Apple/mac makes a product with this basic approach. There is a large variety of hard drives available, blue tooth, wifi, wired, et al. Several years ago when I was buying an external hard drive I considered this. I don't recall the specific hard drive manufacturer I looked at, but it allowed for this general approach (no iphone app at the time).
The thing I didn't like about it was the fact that many external hard drives are loud and that noise from one would drive me crazy in my listening room.
The correct approach is to put the hard drive in the closet with your network gear - away from your components and listening area. You can then stream the files (either via WiFi or Ethernet, depending on your hardware choice) to your listening area. The PS Audio DAC with Bridge does this without a computer (as does the Linn DS player, Logitech Transporter, and a few others catching on).
You can do this with a computer as well if you wish, though the one you choose impacts the desired results - especially if it has a fan, dirty power supply, and/or a spinning hard drive in it (which defeats the purpose of getting it out of the room). I did this with a Mac Cube (no fans) a few years ago, and I know some have done it with a laptop using a solid state HD (no moving parts). But it's still a computer in the listening room that I find distracting.
That said, I recommend to everyone looking into this to just bite the bullet and invest in the full integrated solution. For an interim tryout, you can use the less expensive Sonos or Squeezebox hooked up to the input of your DAC, but you will eventually want the integrated solution of a Perfect Wave, Linn DS, Transporter, or similar DAC.
Whatever you do, make sure to keep a backup, or two, somewhere else.
I've heard horror stories of people uploading all their CDs to a hard drive, then selling off their entire collection, and the hard drive breaking down.
One of my stand-along backup drive failed last year too. So I would recommend keeping at least one backup, two if you can afford it.
Shazam-you got it right. Western Digital makes an inexpensive NAS (network aware server) with a 10/100/1000 ethernet connection to your switch (router) allowing it to be shared by any device on the network. I use a cheap and quiet netbook to access the files and direct them to a wireless music bridge which is connected to my stereo's preamp. The weakest link is the quality of the music bridge, but much has improved over the last 4 years. The beauty of this setup was that I already had everything except the music bridge when I decided to experiment. It also helps to understand networks.
Why not just use itunes and the remote program it is free then go out of the PC to the Dac. That is what I do I ahve a bryston dac I take the usb out and it sounds great. The key is finding the right dac and usb cable. I also have a NUVO music port, great device but pricy. It syncs with itunes, wmp, etc and is a little music server with 4 lines out, also streams pandora radio time etc. Great little device, since by nature it syncs with a PC all your music is backed up.