Is this a reasonable Audiophile Mac-based Server?

The connection of using an Airport express to a DAC is not ideal IMO. A USB based DAC such as the Benchmark DAC1USB and Wavelength DACs give much better results.

I prefer having a Mac Mini connected to a LCD display, wireless keyboard, with quiet 2.5'' based HD directly connected in the same room. Simpler and works better than my experiments with the Airport Express.

You won't believe how much more convenient and better the sound is of the Benchmark, fed by the Mac Mini via USB rather than using a standard transport and SPDIF or Toslink interface.

Good luck!

You might also look at the Slim devices transporter.

Looks good to me. This is nearly identical to my setup. However I use software on a Mac Mini to control multiple CD players as the source rather than iTunes/hard drive source...of course my setup is 7 years old and, at the design time, ripping a thousand CD's to lossless files was impractical (costly)...ripping to a hard drive still remains a daunting task for me one day when I eventually go to a raid server based source (which I certainly will).

Being able to sit in the listening chair and select and cue music and surf the web for information about the artist and/or musical piece that I am listening too is simply wonderful ( I feel like Austin Powers - yeah Baby!) - certainly better compared to fiddling with CD Jewel cases and feeding a CD tray and punching buttons to select the appropriate track to play all of which just gets in the way of the music)...

FWIW - I think your solution is well thought out.