How can I get the best possible sound from my PC?

Get ahold of Tok20000 from audiogon and let him know your problem- he may have exactly what your looking for.

Use wav files or some lossless compression on wav files. Get a good proaudio sound card with digital output. Use an external DAC.

EAC is the best ripping program.
Foobar is the best player.
Plextor make the best CD-RW drives.

Thanks Tireguy. I will get in touch with that guy. So the answer seems to be: use a high quality external DAC (which I am doing), use a high quality sound card, and send the digital output from the card to the DAC. Does anyone know what is the best sound card out there in terms of sound quality? And is there an alternative way of doing this that might give me better sound?

Since you have good high end equipment, you might consider a good audio card like the RME Audio DIGI 96/8PAD which has S/PDIF digital outputs (optional AES/EBU balanced digital I/O breakout cable available), good clock synching (for low jitter) and high quality circuitry for minimizing PC EMI noise from within the PC cabinet. This card was reviewed in Stereophile magazine. If this seems like overkill to you, check out the CardDeluxe from Digital Audio Labs. If you want AES/EBU professional quality balanced digital I/O, you can get an optional interface to add on. The CardDeluxe was a Stereophile Recommended Component. For an even lower cost alternative, you can go with an Echo Audio Mia MIDI which only offers S/PDIF digital I/O. Finally, the lowest cost choice would be an M-Audio Audiophile 2496 PCI card which offers S/PDIF digital I/O.

Both EAC and Foobar programs are available for free to download. Google search for them.