Digital stream to a computer via Toslink or coax

Sure - you just need a sound card for the PC that has that interface. Many manufacturers support this interface now. I have used an M-Audio 2496 Audiophile sound card for a few years in a music server - it has coax input and output, as well as analog ins and outs. Very affordable, works great.

As much as I love seeing these music servers starting to become mainstream, if you're going to have a PC in the path, you might as well just have the PC be the source, with music server software on it. It's much cheaper than something like the Olive, and they have much more powerful interfaces, IMO.

A music server to a USB DAC should be a great way to go - I haven't bought a USB DAC, but use a music server via coax S/PDIF to my DAC. The Burwen setup sounds really cool, and hopefully will spawn other efforts in the same direction. The only reason I haven't tried it out is that, if my understanding is correct, you have to use it with Windows Media Player. I'm not sure how you'd use it if the Olive was a source, etc. - my understanding is that it is a plug-in for WMP. In any case, as a music server, WMP is just plain terrible, IMO - there are many better choices. I have committed to WMA lossless as a storage format, figuring that you can't go wrong with a Microsoft standard long-term, but WMP is just not a good option.