What would be the difference between stereo and 5.1, 7.1 if im listning only music?. DO i get more quality if im using 7.1 ore stereo?.
I will just answer this question of yours.
All the music that you hear, other than those which specifically say they are recorded in multichannel, are recoded in two channel stereo. So there is no value addition that an AVR can provide. I am not aware of any multichannel audio that is compressed in MP3 format.
In terms of decompression and other tricks, if you get a good sound card such as the once suggested by TheVortex, you can do all that on the PC itself. But remember one thing, an MP3 is a compression that actually removes data from the original file. Something like 40MB is compressed into some 4 MB. Even if you can compress at 100%, you are talking about a 20MB file. So to make it 4 MB, a lot of data is removed. No trick such as those propagated by Yamaha or Onkyo can ever bring those lost data back. These just enhance some frequencies and increase the amplitude to make you feel good.
A multichannel system such a 5.1 or a 7.1 is meant for movies, NOT for music.
What you ultimately use depends upon what you mean by the word 'quality'. If you understand music in it's highest quality and are aware of the imaging, clarity, and precision a high end system can give you, you will not be talking about using an AVR for music. If you need that quality, you are looking at a much larger budget.
If you just need music to fill the room and come from many speakers, yes, you can use an AVR. But remember, it is essentially the same signals that are coming from all speakers.
If you read through the forum, most of the questions you have asked and could possibly ask have already been asked and answered. MP3 vs Redbook CD, DVD Player, vs CD Player, 2 channel amp versus AVR, using PC as a source, sound cards, speakers have all been discussed.
Since you are looking at changing the card later, and have a limited budget, see how you can maximize the use of what you already have. Products such as the Asus Xonar has an excellent DAC and is reputed to extract sound of the highest. Similarly, assuming a good analog signal is sent, a product such as the AudioEngine has a good reputation of combining amplifiers and speakers into an enviable combination.
A PC is slowly becoming the choice of medium to store and deliver music. More and more manufacturers are providing good sound cards and good delivery mechanism. But, even if you are ready to spend thousand of dollars on a DAC, an high end amp, and high end speakers, there is only so far you can go with an MP3 file. Thus, as I said before, maximise the usage of you current equipment, and see what is the best you can get for 400 dollars.
Cheers