I currently manage digital music with a machine built around a Shuttle barebones system, similar to this model:
http://www.motherboards.org/articlesd/hardware-reviews/1227_2.html.
This is less than half height case built with a Celeron, 512 MB RAM and a 100GB/8 MB cache drive. I am currently using an external 80GB drive as well. The machine is built with extra quiet fans & Dynamat to keep the noise down. It is nearly silent, you can barely hear it in a quiet room.
The machine has a built in S Video out and I use a Stereo Link 1200 DAC
(
http://www.stereo-link.com/)
which allows me to bypass the sound card via USB audio. It has a DVD player, but I do not use it in a home theater capacity, I have a conventional DVD player for that.
This computer runs Windows XP Pro. I use Winamp 3 & the Izotope Ozone analog modelling program for audio playback(
http://www.izotope.com/products/audio/ozone/winamp.html). I use the latest Windows Media Player for video.
It lives behind the cabinet that houses my TV & other HT gear. The only monitor connected to it is the TV, so I usually use Windows Remote Desktop(like PC Anywhere if you don't have XP) from other computers to control Winamp, build playlists etc.
I am able to output audio from my HT receiver to other audio systems in the house and it is very convenient to use my laptop & wireless network to control the music content where ever I am.
Most audio gear enthusiasts shun this sort of thing but it works great for me. I have a decent 2 channel set up in my office, and there is obviously a big difference with vinyl or CD as a source, but mp3 files sound better than most would think. This is also a great setup when we have guests over, I can set up 5 hours of music and never need touch the systems.
