My Sony VAIO uses a NeoMagic NM2200 for the sound, and although I don't have anything else to compare it to, I think the MP3 compression generally causes more distortion than the hardware.
Try to get a big hard drive though. Mine is 6.5GB, and that's really not much when you start loading on music. It doesn't take long to listen to 50 albums, and even less to listen to just the ones you feel like hearing. I spend a lot of time copying MP3s off CDs I burned. I also recommend making a special mp3 partition. When you format it, you can have the filesystem use as few inodes as possible. That'll give you a bit more space for data. The tradeoff is that you'd run out of inodes if you tried to fill the filesystem with small files, but with MP3s that's not an issue. On a related note, does anyone know how I could use an extra IDE drive with my laptop? I know I could get a SCSI PCMCIA card, an enclosure, and a drive, but big SCSI drives (~25GB) are expensive. Is there a way to hook up to an IDE drive outside the case? I'd rather not get an entire desktop machine just to use it as a fileserver.