Most major brand (Maxtor, Seagate, WD) internal drives retail for close to $1 a GB when you look at drives 100GB and up. That means on average you can expect it to cost you maybe $0.60 a disk to store them digitally (ripped as .wav files). (That is, just for the storage space.) Now with something like FLAC you can compress them almost another 50%, which pushes the per disk cost down to pretty much the same cost as buying CD-Rs in bulk on sale ($0.25/disk is pretty reasonable for a sale on a spool of 50 name brand disks, although I have seen less.)
Assuming to put together a relatively cheap dedicated computer to house this you need an additional $300 or so for: case, MoBo, proc., ram, and sound card on top of the cost for storage. It's definately still on the expensive side although not unreasonable for what you get. This system is assuming your mother board has built in LAN and you can upload everything from some other machine to this one, as it will have no cd drive, keyboard, monitor, etc.
There are other things to consider too like data protection (RAID/Backup? increase your storage costs), fan noise (all those hard drives spinning will get hot, water cooling amounts to additional costs), I'm sure I could come up with more but I'm getting lazy.
