So I like to pre-oder the Collectors Edition, but I am easily annoyed by all the DRM bullshit. So far Steam was the way to go for me. Also got the last two games in the series through steam. So how does this work. Is there simply a download code in the box? I do not want to pop in a disc in order to play, and I want my automatic updates.

If it works the same way as Empire, you put in the disc, and steam litteraly installs the game.. 
The game is then permanently added to your library, and you do not have to download it. 
Hope that helps :) 
 
EDIT: mind you, I didn't get the collectors edition of Empire, so I don't know how that worked, but since it is a steamworks game I'm guessing it works in a similar fashion.

And how about DLC. Would that be compatible?

You'll just pop the CD in, enter the CD key and it will install it to steam. From then on, it will be exactly like any other steam game. You'll automatically get updates, DLC from the steam store will work, and if you uninstall it you'll be able to reinstall it by downloading it through steam. 
 
It's probably also possible to install it without the CD right at the start, by entering the CD key into steam and then downloading it, but I've never actually tried that with a retail steam game.

" You'll just pop the CD in, enter the CD key and it will install it to steam. From then on, it will be exactly like any other steam game. You'll automatically get updates, DLC from the steam store will work, and if you uninstall it you'll be able to reinstall it by downloading it through steam.  It's probably also possible to install it without the CD right at the start, by entering the CD key into steam and then downloading it, but I've never actually tried that with a retail steam game. "