I am going through an overhaul of my system this year and I went for a computer + DAC based solution (Mac-based). this does not necessarily mean it is limited to downloads. And downloads do not mean low or high quality necessarily. It all depends...
High quality downloads (16/44 and higher) - currently very limited choice of sites and music. Linn Records, Naim Records, B&W Society of Sound, HD Tracks etc etc (check out computeraudiophile site, there is a list of all hi-rez sites there).
Low quality downloads (lower than 16/44) - big choice of mainstream music (Itunes, Amazon etc etc) but only up to max 256k.
Computer-based solution can also handle CDs nicely in uncompressed formats. With a good external DAC or even a network of (wired or wireless) streamers it can be the heart of a very high-quality music management and playback system.
Alternatively, you can use a music server instead of a computer. the likes of Sonos, Olive, Naim Unity, Linn DS, Squeezebox etc etc are worth lookin at. New models come out every several months from variosu makes - this field is really developing now.
Research and decide on the music formats you want to use, what do you want your system to do (resolution, formats, networking/distribution, multiroom or not, interface, import, control, back-up, amplification) and step in the 21st century.
When I started my upgrade I too was swamped with all the info and decisions, but it is all manageable. move step by step, do some reseach and if not clear, ask some questions here - there are some very knowleageable and helpful people here, both from WHF and not.