Is this a reasonable Audiophile Mac-based Server?

Just to add on to Edo who has certainly put together a nice rig -

Running out of a G5 is a nice way to go. Before I moved to USB, I ran the Wireworld SuperNova Toslink from my G5 to my TriVista and it was very very good. Fine solution to 15 feet. No cables longer then that.

There is no "but" except that you really need to pay attention to the quality of the cable. Also be aware that not all Toslink implementations are created equal. So YMMV depending on the DAC.

However you may not need or want a G5 (full size tower) for your listening environment. It works for me because the rig is also my office - I just put up with the low level noise. If you are using a tower, one thing I would recommend is to take advantage of the SATA drive implementation rather then the LaCie USB/FireWire implementation. SATA is much more robust to live with (no FIFO/LIFO nonsense) and doing back-ups between SATA drives (which is essential to plan for) is much faster. Besides again in the office context it makes sense for me,

A lot of guys are doing Mac Mini implementations which seems like a very nice way to go if it works in your room. Both the iPod Touch and the iPhone can control it remotely. Front Row is free etc.

I tried a different approach that probably isn't popular but works in my application. MacPro with Apple Lossless files transfered to 160 GB Apple TV with Toslink connection to Theta Casablanca III with Extreme DACs. Remarkably close to CD's digitally into Theta. Uses Apple TV's interface with I don't mind. Music stored on Apple TV HD rather than streamed actively on wireless. Needs HD monitor.

Apple has just announced some upgrades to the Apple TV along with a price drop. Assuming you have your rig in a room with your HDTV this is an elegant solution.

I'm still a little confused why everyone insists on going wireless instead of getting a Mac Mini, a dac & a huge hard drive that can interface directly to your system. Throw a wireless keyboard/mouse or an Apple Remote under your sofa and you're done.

Synthfreek - good point - I use that setup but no DAC - my mac mini directly controls ALL sources (including CD player preamp and source selection via an USB to serial link to an infra red controller box)