External hard drive to Surround sound processor

Unaware of any way to do this without computer to decode the MP3s and control the playback. You need something to let you choose what/how to play the songs. Easiest solution might be a Squeezebox/Sonos/etc. type system. HDD hooks to computer and plays over internet connection. Especially nice (and easy) if you have wireless internet.

I have a Squeezebox. Software runs in the background and doesn't affect computer performance. HDD is hidden behind computer, and have the small (and actually attractive) squeezebox in the rack with the rest of my equip. The software allows me to browse by artist, album, etc. Easy to use.

You have two choices:
1) a USB to S/PDIF converter that supports AC3
2) a PCI card with S/PDIF output that supports AC3

Both are available.

Thanks for your suggestions. Audioengr, I will have to do a little research to decipher your answer. I am a newbie in this area so I don't know what a S/PDIF converter is or AC3. But I will figure it out. Thanks for the helpful suggestions.