Hi, as long as you only want to playback one file at a time, my SimpleSDAudio library will do the job without an additional DAC. The library also contains an example where you can select the audio file via a web-interface using the Ethernet-Shield. But for this library you need to convert the .WAV-files to a different format before putting them onto SD card.You can try to change the library that it supports playback of multiple files at a time, but the slow SPI to SD card (also used for Ethernet shield...) is the limiting bottleneck. In lower quality it could be possible to play 2 or 3 files at the same time.
Are you sure that all your files on card are completely non-fragmented? Try the following: Copy all files from card to PC, format card using a full format (not quick-format), copy the files back from pc to card. also avoid having long file names and directories on card.