I see you've been excommunicated to the vast, emply, desolate and lonely region of the forum known as "Computer Audio".

I personally don't know the best solution for your budget, because I tend to spend more money on the things I do.

Without researching the options more intensively, I can at least HIGHLY RECOMMEND that you check out the Squeezebox:

http://www.slimdevices.com/index.html

You can get one for $250 (wireless for $300), so it's not too far out of your range. It has a very good DAC (probably better than your Yamaha), but it can also output an SPDIF digital signal.

It's a high quality unit for the price, and can handle a large number of different formats, including FLAC and WMA.

It's also an awesome way to manage your music -- you can operate it with a remote control, while your computer sits in the other room.

Take a serious look at it -- you're not going to get a more powerful, high quality setup for that kind of money.