Getting a "High End" computer based audio system to sound as good as a "High End" stand alone CD player or CD player/DAC combo, is tricky, as well as expensive. If you're a PC guy, consider going with one of these dedicated servers. There are instructions on the site for assembling the exact parts you need to build one of them yourself, or you can purchase one ready to go. 4 models to choose from, v3 from simple to pretty sophisticated.
http://www.computeraudiophile.com/section/c-p-s-489/ JRiver, the recommended interface for these servers and mentioned by JuniorJBL is probably the best sounding program for Windows available. Certainly better than ITunes, Media Monkey, etc.
If you read the forums at the Computer Audiophile site, you'll see most of the recommended USB DACs are very expensive, and often don't sound as good as DACs with S/PDIF (coax) inputs and used with a USB/S/PDIF converter. Another layer, another box (at least) and more wires, however. A battery power supply for the server, S/PDIF converter, and possibly the DAC can improve the sound quality to approaching the "High End" CD player, but obviously increases cost and complexity.
The system you laid out, and the variations others have shared are pretty simple, probably sound pretty good, and won't break the bank, but won't give the performance in a "High End" system you may (or may not) need/want. It seems like it should be simple. "They're just 1s and 0s" everyone says, but everything in the chain has an effect (usually for the worse) on the sound quality getting to your audio system.