>>Would I just use a DAC, or is there a better way? Would Microchip's
>>MCP4821/4822 parts be suitable? What am I looking for in a part for this
>>purpose?

For some basic "toys" or alike, you can use the Voltage Reference out 
(available for example on 18F2620/2520) as a rough 4 bit DAC.
It has a high output impedance, so an OpAmp is mandatory (or an audio 
amplifier, in your case).
Or, consider also a R-2R ladder if you feel like...

Reading WAV files is very easy, to begin with in your project. You can 
sure use other codecs, but most of them won't perform good with HiFi audio.

-- 
Ciao, Dario
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