A few observations:
What if you could eliminate digital extraction from the optical disk as a source of jitter? You'd have solved half of the CD player's challenge. This is precisely what can be done by "ripping" CDs into digital files with a PC. Just about any CD drive will do, and just about any PC that's less than... say, five years old. Sub-$500 PCs, therefore, can be used. That's much cheaper than even entry level high end CD players, and just a fraction of what the best CD players sell for.
It should be noted that network jitter on IP-based networks is a very real thing.
A cursory glance at RFC1889, which defines RTP, shows the great lengths to which people have attempted to overcome that issue within IP networks. Furthermore, it should also be noted that dealing with jitter within a CD player would be much easier than dealing with it over an IP network, where other clients on the network can adversely affect network conditions at any moment.
While IP networks provide very robust quality of service mechanisms, by definition they do not provide timely delivery--which means jitter is basically a given over any sort of IP network. Different mediums have more or less jitter--wired networks are decidedly better than wireless or powerline networks.
The 8 MB buffer on the squeezebox is more than enough to deal with any jitter issues--assuming they buffer properly--but it's just as easy for a CD player to incorporate the same feature to reduce/eliminate jitter. Removing the optical extraction step is probably the only realistic improvement; other than that, the same techniques need to be employed in either scenario.
The IP jitter issue would only come into play if the data were decoded/decompressed on the server to regular digital audio (PCM in this case) and then sent in realtime to the digital network player (in this case, the SqueezeBox) for either digital to analogue conversion and analogue output or digital output to a DAC. In the case where the compressed or encoded data is sent to the digital network player for decoding after
transport, network or IP jitter is of no significance whatsoever.
The SqueezeBox handles the decoding/decompression (i.e. post-network transport) so IP jitter is not an issue here. This is part of my reason for choosing this device (the fact it handles FLAC was what caught my attention; the fact that some of its components were designed with audiophile use in mind and that it performs decoding post-
transport is what helped me make the final decision).
Your one chance for jitter here is between the decoding device and the DAC; in the case where you use the analogue output of the SqueezeBox, that's somewhere within the SqueezeBox. If you use and external DAC, that's when the digital signal is sent out to the DAC. Benchmark's DAC1 is designed to minimize jitter at the input stage (higher-end clock-regenerating DACs do the same, but Benchmark's supposedly uses a different method).