Media Center will convert DSD to PCM on-the-fly during playback.
There is no need to do an offline conversion to PCM and create new files.
I don't have any experience with it myself, but White Bear Media Server will let your Squeezebox show up as a DLNA renderer that Media Center can play to.
There is also an option to go from PCM to DSD on-the-fly as well (DSD Encoding) if you want to do that once you have a DSD-capable DAC.
I would not buy a new DAC just to have access to DSD playback - I don't think it's worthwhile at all. My DAC has native DSD support, and I still have Media Center convert to PCM during playback.
The quality of the recording/mastering is what matters. The format does not.
I'll try to avoid installing additional software where possible. Just another thing to go wrong or add complication to my processes. EAC, iTunes, Audiogate, Squeezebox Center and in the near future; MC19 are trouble enough for me!
My less critical listening system is actually my speaker setup which runs through an outboard DEQ before getting to my DAC. I also have a little iPod and carry my netbook with me overseas to use as a transport and all those require my music to be in PCM. My primary listening system is my headphone setup and that one doesn't need any EQing, so I can afford to play it back in DSD. So you see, I have use for both formats and would prefer to have the freedom and flexibility of having my music available in both PCM and DSD. HDD space is not an issue, even when I'm travelling!
Anyway, I am a supporter of DSD. I've been in this hobby quite a while now and DSD has always sounded good to me from the start. I've got a Korg MR1000 and a Sound Devices 744T which costs 4 times as much and the MR1000 just sounds better although the SD recorder has a lot more features and flexibility. I'm not sure how much I would have to pay for a PCM ADC to get teh same sound as my MR1000.
I also agree that quality of recording/mastering matters most, but the reality is that with all my favourite hits from the 80s and early 90s and even some recent releases, the damage has already been done and I've got no choice. DSD seems to smooth things out and add a more analogue flavour to the sound. The only redbook recordings that consistantly sound analogue enough to my ears are those made by Telarc. For the crappy recordings, I use a Non-oversampling old-style DAC with a tube buffer to make playback more consistantly pleasant.
While we're on the topic, it's also key to note that implementing DSD properly seems to be cheap and does not require as much care and expense as PCM. A few circuit designers have mentioned this as a fact. As mentioned earlier between the MR1000 and 744T, this is also what I've experienced myself. Schiit has also recently released their "Loki" DAC that does DSD natively. Just US$150. From reviews that I've read so far, it doesn't seem to be as universally praised as my MR1000's DAC section. However, criticism has also been tiny. I'm also considering a Tascam DA-3000. That's just $1000 and good value considering what it can do. Good mentions here if you want to read through the entire thread. Will probably sell the 744T and use the Tascam:
http://www.gearslutz.com/board/high-end/834139-tascam-da-3000-a.htmlI know DSD is certainly troublesome and expensive if mixing and mastering and all that, but as a format simply for straight recording of and or playback (like I do with my recorders), it's actually cheaper to get pleasant results from DSD than PCM. Just my opinion. There's space for both formats.