See:
http://wiki.slimdevices.com/index.php/Squeezebox_Touch_as_a_Home_Music_ServerThe Touch runs its own stripped down version of SBS, and
can work from an SD card or an attached USB drive - without any external PC/server. However, there are situations one
might get better performance from a Touch if your music library is on an external computer running SBS. One of those is streaming 24/96.
Useful info in the article about capabilities/limitations of Touch as independent server, as opposed to being interface for an external music server.
BTW, there are threads here and on other forums popping up about the sound quality of the Touch - both digital and analogue. So far very favorable.
Steve, it will be interesting to hear what you think after auditioning one.