Definitely agree with some of the previous posts.....with a very good quality sound card(Lynx or similar)and possibly an external DAC or upsampler,a PC is capable of keeping up with some pretty good conventional systems.
If you're prepared to spend up to £400 on the card,you should get decent results,and as advised above,Branxx's posts are pretty much the definitive answer from here.
I use a modestly priced sound card,but with an offboard upsampler/interpolator and DAC,with very good results,but the total cost is well above your planned spend.
As for your question about music storage on hard drives,MP3 is not what I'd choose,due to data compression with a lossy format,and the resultant flat,nasty sound even at the highest current MP3 sampling rates.
If you use something like EAC(
www.exactaudiocopy.de ) to extract files to your PC,and a player such as Winamp to bypass windows Kmixer(which samples all inputs to 48kHz with resultant loss of quality in the processing),then you should get decent results.