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File Size vs. Sound Quality
Probably the most important component of a digital media server is the hard disk. The bigger the hard disk, the more CDs you can store. I'd consider 80GB the absolute minimum, with a larger size extremely desirable. (I particularly like the big 300GB disk on the new Escient Fireball E2-300, or the multiple hard–disk option on the Interact-TV Telly MC1200 that lets you get up to 900GB of storage.)
Of course, the size of the hard disk is only one variable when it comes to determining how many CDs you can store. The other variable is the audio file format used. Lossy compression formats, such as MP3 and WMA, are extremely efficient in terms of storage space; you can store close to 1,200 CDs on a 100GB disk. Lossless compression formats, such as the Free Lossless Audio Codec (FLAC), deliver better sound but are less efficient; with FLAC, you can store about 300 CDs on a 100GB disc. The best sound comes from CD-quality WAV files, but they're not compressed at all; you can only get about 150 CDs on a 100GB disc in this format.
Which file format you use depends on several factors:
Which formats are compatible with the media server. Most media servers handle MP3, WMA, and WAV; fewer handle FLAC.
How much storage space you have (versus the size of your CD collection).
The sound quality you want.
Personally, I can't stand listening to highly compressed MP3 and WMA files on a high-quality audio system, but that's just me; other people are fine with a slight compromise in fidelity. Perhaps the best compromise is the FLAC format, which offers a moderate savings in file size (over the CD original) but with virtually no loss in sound quality. Let your ears be the judge.