Some options to possibly consider: put the music files on an external usb hard drive if there is insufficient space on your notebook hdd. 3.5" drive is more reliable, but 2.5" is smaller and more convenient. A generic drive and file format system prevents lock-in to any proprietary scheme, i.e. in jargon, is more "future-proof". Just drag-and-drop directories of files.
USB-SPDIF conversion. I've used an Egosys/ESI Waveterminal U24. It is usb-bus powered. It has a built-in DAC and headphone amplifier that, besides the usb-spdif conversion, can be used in a pinch as an end-to-end device (from computer to headphones). The device works well with generic usb sound drivers. I recall some (positive) discussion on the device at for example audiogon.
Otherwise there are DAC's with built-in USB input. The diyeden Great March sold at
http://www.diykits.com.hk/dac.html looks interesting for USD195, coming well under budget even with shipping tallied in. Haven't heard one myself and apparently not too many reports on its sound quality in the "west". I would try googling it.
At the other end of the scale, but out of budget, is for example the twindac plus, at around $2K, which also accepts usb input. Favorably compares with dcs if web reports are to be believed.
http://www.twindac.com/TwinDACSpec.htmhttp://www.google.com/search?hs=Q10&hl=en&lr=&q=twindac+plus+dcs&btnG=Search Some other usb dacs are mentioned here (Fubar, Stello, Bel Canto, ...):
http://www.google.com/search?q=site:sonicflare.com+usb+dacCable. If not using a usb dac, then whatever dac one uses, standard 75 Ohm coaxial should be fine. Similarly any properly (normally) shielded generic usb cable should be fine too. I would not worry about cable for now.
A lot of choices to be made: dac with or without usb. File storage on computer or externally on say a usb hard drive. Finally priorities: a rig that can compare with a home system or merely one for convenience at considerably lower cost.
Possibly, (some) DIY may be an option too, in which case there are even more possibilities.