Since you said you didn't want to spend hundreds (e.g. no Squeezebox), a simple solution is a USB-Optical converter box like the Behringer UCA-202. They cost generally between $40-80. You can also get a modified one from the Tube Audio Designs website.
Another option is to get a cheap soundcard and use the digital-out to a good DAC. I wouldn't recommend using the analog out of a soundcard, unless you go for a pro unit like the RME Fireface.
Another option is to get a cheap soundcard and use the digital-out to a good DAC. I wouldn't recommend using the analog out of a soundcard, unless you go for a pro unit like the RME Fireface.