I'd love to see this as well. I'm going to suggest that 'the future is (almost) already here'.
Just a few thoughts:
The connection from such a beast to a receiver: The ipod's dock *could* be fitted for optical-out, as far as anyone I've talked to has said. I wonder if the analog DACs on such a device could ever equal that in a CD-player or receiver due to the interference from the hard drive spinning? (just taking a shot, I know there's a substantial amount of 'noise' that's bad for DACs inside a computer case)
Getting from CDs to a hard drive: The preferred audio extracter (CD->WAV) on Windows is EAC (www.exactaudiocopy.de). It reads each audio sector at least twice, and if it gets different results, re-reads up to 81 times and averages.
3. Compression: I'd suggest that quality lost to MP3/AAC/OGG compression is minimal compared to the variation in discs' mastering quality (for more popular music, at least). Depending on your tastes, don't count out compressed files as it opens up many more options in making this work- i.e. portable hard drives like the ipod (that the loss is trivial is controversial, and it hasn't always been the case if so).
Reliability: CDs get scratches. Hard drives die. Pick your poison. A 7200+ RPM hard drive will wear out faster than a 5400 or lower RPM drive, and be louder (I believe the phrase is it'll 'raise the noise floor'? Must get into this terminology). Even with DVD-A or SACD data one wouldn't need a 7200 RPM drive (in fact, such a device might want an even lower RPM drive).
Interface: I like my ipod's interface, but something that could interface with a remote and a television would be nice. The stuff that isn't so portable.
I want to say that, given a few tradeoffs, this device is already pretty close.
Are these tradeoffs ones you're willing to make / what would you like to see on the market that's not out there now?
