The noise of the computer is likely what will drive you bonkers.
I have used an old mac mini successfully in the past, but mine was too old to load current iTunes so that became an issue for me. It was a very quiet piece, the USB drive was much louder than the mini iteself with the outboard power supply.
If you can find a slightly newer, used Mini it will be excellent. I would bet a new base Mini would be great too, and I think those are around 500 or so.
Your older piece could work fine too, if you can locate it physically in an adjacent room?
I currently use an Acer netbook running Logitech software, and a Pogoplug hacked with Logitech software as the player. All of it is in the media closet adjacent to the main room. I am happy with that solution, but with all the idevices around my house, an Apple solution would work great too - but was more expensive to get into!