Best compression format for PC Jukebox

I'm getting a Brick, Wavelength Computer DAC here real soon and will be using my laptop for the server. I have already saved most of my CDs for my iPod in AAC /128. I suspect I will want to save music files in another format and better quality. Will I need to purge the lesser quality files?
Should I use anothe computer...one for iPod one for server?

I've read some about Exact Audio Copy but have heard that it's a little comlicated.
Any suggestions?
HD space not an issue. I'm willing to get external drive for my Dell PC...any suggestions there?

Thanks,

MC