I need help putting together a budget system

As a start please share with us your room size, musical preferences and whether you see yourself as a solid state or tube kind of guy. Is your space dedicated or shared (i.e., with the family or are you single)? These all matter and will help you avoid getting a lot of shot gunned responses.

Apogee minidac with firewire card (around 1000 usd) and a pair of active speakers. If you like a bit romantic sound you may add a tube pre with mellow sound. Such a pedestrian set up could produce shockingly good sound, and possibly the best possible set up if your budget is limited. Unfortunately, these gears are fairly ugly.

Love the Apogee DAC with active speaker idea of Ajahu, nice approach. I would suggest:

Magnepan 1.6qr's $1000 (used)
Innersound ESL amp $1300 (used)
AES Tube Pre $700 (used)
AppleTV $269
TADAC tube DAC $700
AES phono stage $300
Project Debut III $400 (with cartridge used)
Kimber 8tc speark wires
Kimber Hero Interconnects $331

$5000

That's a great system by any standard. I would love hear that.

sorry to hear about your loss

Apple Lossless is terrific and the only way to go if you are a Mac guy - nothing else makes the least bit of sense. If you are a PC guy you will probably want to check out FLAC as well

I personally would go with a Mac laptop or tower (depending on what else you need to do with it) driving a Keces 151 USB DAC. Really a great sounding unit for $250 - made in Taiwan. I have had five (5) DACs and this may well be the best one - and its dead easy to use

I would use this to feed a beefy integrated amp - huge range of choices new and used for under $2K. The rationale being that you save a ton of money over separates not buying things like interconnects, power cables and tweaks. Plus it takes up a lot less space and most come with a remote which is nice.

As fpeel points out, recommending speakers is difficult without some more particulars about your space and taste.

As far as interconnects and power cables, keep it simple and stick with someone like Harmonic Tech or Analysis Plus. Both have a broad offering and have a lot of product out there. Buy used. All you need is one great pair of ICs, two power cords and speaker cables in the appropriate length.

Enjoy the process and your new home

Active Speakers and a DAC - I agree with Ajahu. Genelec 8050A (in white) with Apple Mac and your choice of DAC would look real cool in a PC setup and yet give most hi end systems a run for their money for sheer sound quality.