Ross Burton works on a nice little app called sound juicer. This app aims to provide a simple to use cd ripping interface. The thing thats strikes me though is the fact that no one ever thought "Hey this is a form of file management, lets put it into the file manager!" The file manager, what you say? Thats crack! Think again. The file manager provides the exact required interface here. Ripping cd's is just another form of managing your files (these just happen to cd audio tracks).
Dave's Proposed CD Ripping Interface
Compare the above steps to rip a cd to the similar steps to copying files from a floppy disk. *gasp* you can replace the term CD Player with floppy disk and rip with copy, and you have virtually the exact same steps.
Addendum, July 8th
I whipped up a quick mockup dialog for the UI mentioned above. One issue that came to mind is that users may not want to be bothered every time they try to copy files from an audio cd to a folder. This leaves us with two choices. A lesser designer might suggest adding a "Don't ask me again" checkbox, but as mpt says "oh, so you didn't really need to annoy me, but you thought you would anyway?." The other option is to provide the preferences from the within file manager preference dialog. The issue of a dialog vs preferences really requires two questions to be answered, "How often do users actually rip their cd's?" and "Will they most likely always choose the same format and endoding?" If the answers are quite often and yes, I think a preference available from the file manager preferences might be a better ui, if the opposite answers are true, than perhaps a dialog is better.
2:36 AM, time to go to bed....
 I do think these preferences are useful/necessary. A hi-fi audio fanatic will likely choose a high-bit rate to encode at, a linux geek will want to use OGG and your traditional file swapper will most likely want to use MP3.