Thanks for the great posts. Especially the idea with running it as a console w/o any GUI is great, if that's what makes it able to work with the hardware limitations. I currently use the squeeze play on my HTPC, but I never use the interface, as I control the music from my smartphone and/or a pc (via browser).
Some of your posts are a little technical for me, and I guess I need to look in to some things when I actually own a RasPi.
Another challenge for me is gonna be the sound output, as there is no way I'll use the onboard DAC. Will try getting it to work with my Cambridge DacMagic or any other dedicated DAC.
First off, as noted, the player is written in Lua (not sure about the C, I only ever saw Lua source), which is a scripting language. My experience of it is as ported onto the 02 Joggler, where it remains the "killer application" for that platform. And, also as noted, you can download the source from the Logitech web site.
Secondly, if your DAC Magic has a USB input, then the Pi may well be able to drive it, unless the kernel's had the "usual suspect" DAC drivers stripped out. I can tell you that for the Joggler, which runs a really minimal Liniux implementation, it does work with the DACs in my (cheap Chinese but nevertheless beautifully made, inside and out) Topping TP-30 Class D amp / DAC combo. This is because it has the very common Burr-Brown DAC chips inside. So, you might discover it is plug & play, or you might have to ask for a driver to be ported to ARM for it. Once you have done that, it's just a minor tweak to a config file (/etc/asound.conf if I remember rightly) and a reboot.. then you''re cooking with gas. (Sort of) easy.