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Dropouts can be because the PC is high on latency or because of the Wi-Fi.PC can be tested using a tool like http://www.thesycon.com/deu/latency_check.shtmlReplace the Wi-FI connection by a CAT5 cable to test if the Wi-Fi is the problem.
My solution was to build a CAPS v2 computer audio server and connect it directly to external hard drives which contain my music files. I also connect it directly to my USB-SPDIF converter, and that goes to my DAC and the rest of my system. I use TeamViewer to control the CAPS v2 server remotely. This works great - my music is not wireless, so I never get drop outs, but TeamView allows me to control the CAPS server from any of my other devices, such as my laptop or my iPad.
If your Wifi is a problem, you may want to look into fixing it. Where is the wireless router relative to your computer and PS3? What does signal strength look like for your computer and for the PS3?
The Squeezebox Touch has an internal version of Squeezebox Server software that allows you to play music from an external USB drive without the use of a computer.
However because of the limited processing power some users have reported problems with playing files (particularly 24/96) and it apparently can be excruciatingly slow to scan a drive with a large library of songs.
Looks like the Wi-FI indeed.If you have a smartphone you can try connecting the PC straight to the audio and use JRIver’s WebGizmo on the phone: http://wiki.jriver.com/index.php/WebGizmo
So apparently, one has to have a computer in the mix when using a SB touch.
Otherwise, it appears that my options are to build a music server or run ethernet cable from my office to my audio rack.