OK, just talked about it with my wife. You guys are absolutely right, I'm making this more complicated and hard to use than it needs to be (or she wants it to be). So I'm thinking Airport Express now, unless there is a different solution (at <$150) that you guys would recommend. Source will be the laptops with iTunes, which will have copies of the music library on each. We only have a few purchased songs.
Just a suggestion-an Xbox 360 actually makes a pretty effective way to connect to your system. You just plug your iPod into the front with the USB cable that came with it, connect the Xbox to your receiver via HDMI and you can control pretty much all functions using the Xbox controller. I think the signal stays digital the whole way doing that.