eMusic typically allows you to redownload your purchases free of charge. I dump everything on to an external hard drive as a backup though, as I don't want to deal with reripping. I also have a significant portion of my collection on my laptop.
Yes, I concur that eMusic does typically redownload purchases.
My take on this whole CD vs Digital. Preferably, I do like to try to get the actual CD whenever possible, but at the same time, i cannot dismiss the sheer convenience of digital downloads, especially if I would at least like to hear something before going through the trouble of ordering and then having to wait for a CD to arrive in the mail. Also, there is much to be said about simply jacking my iPod into my car stereo and having some 7,500+ songs available right at my fingertips. That was really nice when I drove out to Wisconsin last year - no having to try to "chase" radio stations. No trying to fumble with CD's. All my music right there, whatever I wanted to listen to, whenever I felt like it. No sitting through a bunch of crap to get to that one or two actual good songs that they just might play on the radio, etc.
In addition to my pretty sizable CD collection, I also have a pretty substantial collection of digital music on my dedicated server setup back in a spare room, backed up on external drives and on UPS. In addition, I also have most of my collection in my 160gig iPod, so if push really came to shove, I could restore it from there (yes, there are ways to get your music back off your iPod)
As for the quality of the music, I've found that 192 or better MP3 is quite adequate for most of my needs. I guess I am not as anal about it as some folks are. Now, given the choice, I do prefer to listen to the CD, especially on my Klipsch setup, but for shear convenience, I'll listen to the MP3s streamed off my server.
As for the DRMed stuff, that is why I use eMusic, which has everything in plain ol, non DRMed MP3 files, and have not bought a single thing from the likes of iTunes. I just will not buy into, nor support, any of the DRMed formats. Yes, I know iTunes has started providing DRM free files, but it seems the vast majority of the catalog on there is still DRMed.