An amplifier with integral DAC is not neccessarily the only way to go, the active Audio Engine A5+ would be fine with an Airport Express, however, you might like to consider either the Onkyo TX-8050, or Harman Kardon HK3490 receivers. These would be an excellent place to start if you want to go the more traditional separates route. I would still consider the AEX for streaming to the amp though, as it will work seamlessly with your Touch.
Regarding ripping, you might like to have a look at the iTunes match service, it will match all of your collection on your Touch to 256Kbps, which can then be streamed from your touch from wherever you have an internet wi-fi signal, this will give you more capacity for your collection and may also give a quality boost for all music at less than 256.
If you have the CDs that your mp3s came from, you would need to re-rip to lossless, as you cannot simply upconvert lower bitrates, if doing this though, they will take up a greater proportion of the Touch hard drive and may even exceed capacity, so you would have to consider an external hard drive or small laptop/netbook for extra storage. (I used to use a netbook for the purpose). In all honesty, 256Kbps (VBR) should be all that you need, as this is, in most cases, indistinguishable from the original lossless rip (my opinion of course, but there's nowt wrong with my hearing).