12/14/14: I am almost done setting up my headless raspberry pi music system. This has been fun and I've finally gotten rid of the cord running across the living room that I kept tripping on. I am using the on board audio but I hope to see a substantial sound quality improvement once I get the HifiBerry DAC in the mail. I setup the system with my father's USB DAC headphone amp as a test and heard very good results. FLAC is a popular lossless compressed audio format. I'm using Exact Audio Copy to covert my CD collection to FLAC files. Archive.org has a lot of high quality audio recordings and a huge collection of live music. You can also purchase albums online that are better than CD quality.

12/21/14: I have received the HifiBerry DAC from Switzerland and it has been well worth the wait. The sound quality is much better now and I highly recommend the product.
Potential next steps: Setup an actual music server to serve my music to me on any device, or build a tube headphone amp.

• Raspberry Pi Model B
• HiFiBerry DAC
• Seagate 1TB hard drive STBX1000101
• Powered USB hub. The Pi could not power the HD from it's USB port.
• Music Player Daemon software
• MPD is controlled from any device on my local network using a MPD client.

Setup notes: Configure the Pi or your router so the Pi has a static IP. Setup remote access using ssh. I use Putty to remote into the Pi from my laptop. I had to install and use the ntfs-3g driver in order to get the hard drive mounted. If you are using a USB or other DAC you will need to edit the alsa-base config file and the mpd config file to default to the correct output.