JLM I will take a stab at your questions.
1 - depending on how you configure your AudioPC, you CAN still use a DAC. Many will speak of this as heresy, and will keep the signal digital, to a Panny or something. Others will sneer at the audio DAC, and prefer a pro audio card, allowing them to use a DAC built onto the high end sound card of their choice. For me, since I have invested in the Mensa, I will configure my AudioPC to work with it.
2 - I am not familiar with anywhere that you can download WAV files of current music legally - however, I am FAR from an authority on downloading music - I steer clear of that - it is usually low fidelity MP3 (and by this I mean 128 or so, not that MP3 cannot be good quality - I know it CAN, but I am not for it) and thus not my cuppa!
3 - Sure, lots of people run a LAN in the house with a server full of music and video, and a "light" front end as you describe. I live in a 3 level townhouse, and my home/office PC is on the top floor, and my audio bunker in the basement. By the time I buy the router, and the repeater for the middle floor, I think I would be better off configuring my system as I describe - likely to be lots of opinion on that one, but for me, I only have to please me!
4 - Not sure - heck, when will LCD/Plasma TV's cost what CRT's used to, for that matter? Jeff, I would guess that the new HP HTPC is the thin edge of the wedge for consumer grade computer/tv convergence. One of the user interfaces will take off, and then it will be as simple as installing that (or having it done) into a PC of your choice. I would guess that decent front ends for music and video will be commonplace in as little as 18 months. Not interested in waiting that long personally, and I can likely go out and buy one then, after building a PC sooner...
5 - Not sure what you mean by offsite automatic backup - are you desiring that your music HD be mirrored somewhere else, in the case of a fire or something? It can be done, but sounds custom and not cheap to me. Personally, if my music is destroyed, it is covered under my homeowner's policy etc. You could buy an external HD, and plug it into your sytem, and backup your audio HD that way.
All in all, I will take this as a learning experience, and try to have some fun with it. I already have remote for my Dell, that works for Windows Media Player, but I don't think that is an audiophile approved front end...