Could your friend be thinking of the Apple Mac Mini (a computer rather than just a hard drive)? It does have optical audio I/O which some more modern stereo kit could cope with. Or possibly the Apple TV? It does have both optical audio I/O and stereo RCA outputs

Are you expecting this device to work independent of your computer?

I got a LaCie harddrive for backup purposes last year. I seem to remember some of the alternatives I looked at then (USB/Firewire Hubs rather than hard drives) had additional outputs besides those (can't find details anymore).

I presume you could also use an iPod this way (ie as the hard drive). Various suppliers have leads that would link to your stereo system.

Ross