Originally posted by: MrChad
A better soundcard could make a huge difference. Look at M-Audio's Revolution card (or even the Audiophile 2496). If you're on a budget, the Chaintech AV710 has excellent sound quality at a bargain bin price, especially if you only have a 2.1 setup and you use the high-quality DACs on the rear audio ports.
For software, foobar2000 is generally well-regarded for its sound quality. I would avoid any plugins that change the EQ levels in order to "improve" sound quality. In my opinion they're just distorting the true sound.
One last thing to look at is how high quality your MP3s are. I rip all of my MP3s using Exact Audio Copy and encode them using LAME and the "--alt-preset standard" VBR setting. If you've got the room and are even pickier about sound quality, you can use lossless FLAC encoding so you don't lose any sound quality during the ripping/encoding process. FLAC files can be transcoded to other formats (like MP3) for use in portable audio players.
Good luck.