DAC: A
Digital-to-analog converter (DAC) is a piece of
hardware that turns the digital audio produced by the computer into analog audio that can be sent (post amplification) to your speakers. There must always be a DAC at some point in the chain for any digital audio (whether on a CD in a CD Player or on a computer's hard drive).
You need one DAC in the chain between your computer and your amplifier.
Let's start with your current setup:
Computer: Windows XP SP3 computer. The storage setup for your audio files is irrelevant, but sounds reasonable as you described. However, you will have better options for audio output with Windows 7 (or 8.1) over Windows XP
because of WASAPI.
Prior to Windows Vista when WASAPI was introduced, you were basically at the whim of your sound card manufacturer to provide a reasonable driver that didn't muck with the sound via effects (or allows you to turn them off and works), and your audio does go through the Windows mixer, which does impact the sound quality. It doesn't convert it to analog, but it does modify the audio to mix it with other system sounds (and provide volume control).
To avoid these two potential pitfalls, you'd need one of two options:
1. The best option is to have a "pro-quality" sound card (or external DAC) that provides a good ASIO driver. I don't know if your Creative card does, but it might (I think some cards from Creative did).
2. To use MC's Kernel Streaming system, which can be flaky, but might work well with your device. This is a low-level way to provide a direct interface (bypassing the Windows mixer) to the sound device, but it depends on a well-behaved driver and isn't universally supported (or stable).
I should mention, by a "good ASIO driver" for option #1 above, I do not mean ASIO4ALL-provided drivers. These are just wrappers for Kernel Streaming, and there is no need to do this with MC as it supports it directly (so don't modify your whole sound system and let MC handle it).
With Windows Vista and newer, you can use WASAPI which provides all of these benefits with a re-overhauled sound subsystem in Windows. I don't know if your old P4 will support Windows 7, though, or if you'd be happy with the performance of it in Windows 7. So, that's the rub there. A relatively recent Intel Core-series computer would be a worthy upgrade, of course.
Sound Card: The Audigy 2 Platinum. This is the DAC in your current chain. It looks like
they probably have Windows 7 drivers for that sound card, at least. You may want to check if you're thinking about upgrading.
Speakers: Not much to say here. These
may contain a DAC (if they have a digital input like a spdif plug or something), but you're not using it if you're connecting to them via analog. The analog volume control can impact the sound quality produced by the amplifier. Most amps have a "sweet spot". The best sound quality volume control is from within MC itself, so a good way to do it is to use MC's extensive volume controls to handle volume, and keep the amp's volume knob set at a constant position.
Other Options: If your computer is "within reach" of your home theater setup, the best quality method for a reasonable price would be to get a decent video modern video card with a HDMI output, and run HDMI into your Receiver.
This will allow you to output 8-channels of high-quality (uncompressed) PCM audio to the receiver. The receiver would then be the DAC. This obviously works best with a HTPC, but with decent cables (or a
good twisted pair HDMI extender) you could run it from another room if needed. Then, you can keep the Audigy and the Logitech set in your office or whatever, and set those up as a separate Zone in MC.
Unfortunately, your receiver doesn't appear to be HDMI-equipped, so without a new receiver, then you can't do it this way.
DLNA Devices: Another option is to use a separate DLNA device. Something like the Oppo would work for this, and it seems like you're headed down the right track. This might be convenient if you want to play back to an device in another room from the computer. In this case, you connect the Oppo to your network, and your computer to the same network, and then MC will "see" the Oppo on the network and add it as a zone.
When you play to the Oppo from MC, the sound will be using the DAC in the Oppo or your Yamaha (depending on how you connect the Oppo to the Yamaha), but will not be impacted by the Windows sound subsystem (your sound card or your driver or the Windows mixer or anything). The audio will be sent digitally, across the network, to the Oppo via a protocol called DLNA.
You will be reliant capabilities of the Oppo for media playback, however. The computer will not be "rendering" the formats, it will be sending it digitally to the device. MC can do a variety of audio and video "on the fly" conversions to deal with DLNA devices that only support one format or another, but the device, not your computer, will be the one that needs to decode the "file type" you send it. Also, to be able to browse the MC Library via the device, you'll be reliant on how intelligent the device is in connecting to MC's DLNA server. But even without this, MC should be able to "push to" the Oppo (and you could use something like JRemote to control it from afar).
Unfortunately, DLNA support (not in MC specifically, all across the industry) is kind of a mess. Different manufacturers have different "flavors" of the standard, and it is very difficult to support them all well. I don't know how well the Oppo you mentioned will behave, or what capabilities it has. Perhaps someone else can comment here?
HTPC: I'm going to mention this because it is what I'd do if I were in your shoes. I'd get a nice little HTPC instead of the Oppo, perhaps with a decent external multi-channel sound card if you don't want to replace the receiver and use HDMI. Something like the
Intel NUC (like the ones jmone has been playing with) might be just the ticket. Or one of the
similar little computers from other manufacturers (that Gigabyte looks pretty awesome if you don't plan to game on it). You could get a little
USB BluRay Drive and it could serve both purposes of the Oppo for you, while allowing you to use MC directly in Theater View mode on the TV, rather than whatever interface a random hardware manufacturer designs.
But, this would really be best with a new receiver and HDMI out. If you get a HTPC with decent analog outs (via something internal or an external dac/sound card), then it could be pretty nice, and you'd just go HDMI from the PC to one of the TV's Inputs for the picture. You could also use an optical or analog SPDIF out, but this is limited to 2 channels for high-quality PCM output from the PC. You can output Dolby Digital surround via SPDIF, but that's compressed (and would be recompressed for all movies with "HD" audio formats).
