Hi,
Recently I have auditioned a few CD players in various price range, up from 20K to 50K.
From that experience, I agree with dinyaar that under 25 K, Marantz 6002 came out to be one of the better ones. It certainly was better than the multiple award winning Cambridge Audio 640c v2.
The 6002 was very smooth, so I suppose you got to couple it with not too sober amp and speakers.
The other CDPs under 25K would be the NAD C525, but some users did complain about the transport giving problem. When I raised this point sometime ago in a thread, somebody (probably a NAD reseller) replied that the problem was indeed there with an earlier lot, but the recent ones did not have any problem. The NAD comes under 20K I believe.
On your question regarding MP3 compatibility, let me just say something straight from the heart, I hope you take it in a positive fashion. Generally stereo music lovers would always prefer a well recorded analog recording like LP than a digital recording like CD. Unless the sampling rate is infinite, you really do not capture the music. In CD quality the sampling rate is just 44.1 KHz. But then mp3 quality is even worse. It's a lossy format. Why do you want to buy a dedicated CDP and want to play mp3 on it. I suppose if you really want to do that you can perhaps play them directly from a mp3 player connected to your amp thru a cable (2 RCA to single stereo port).
I have no experience with sound processors. What are they? If you mean something like a graphic equalizer, then it should be of a very high quality matching your amp. Otherwise it will just introduce noise and unwanted coloration of the sound.
Dedicated CDP would always serve you better than a DVD player at a given price point, this I have been told by experts. I have not really tested it myself, but it makes sense, because in the DVD player some more stuff has to go in for video processing and dolby digital decoding, all that stuff I do not know very well.
Let me just say one more thing at the end. I have the view that out of the three equipments (amp, speakers and source), the most important are the speakers, then the source (in this case the CDP) and then comes the amp. However, having said that, the amp and the speakers should form a good combination. I do not know which amp and speakers you aleardy have, but I have built my system around this philosophy and I am enjoying my system for the kind of music I listen to.