Not sure if I get the point of the Wadia iPod dock

"Is this for people who just don't want to mix computers and their systems?"

Yes.

I run a spdif cable from the digital out on my PC soundcard over to my DAC.

This way, I have access to my whole library, instead of only what fits in my ipod.

I can use my Iphone over wifi to control playback via the "remote" application.