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I am leaning toward exactly what you would do. That is what I initially thought would be the case. The difference would be that I would use an additional external hard drive for music storage and possibly add another Airport Express if that is necessary.
My last question has to do with my proposed setup. The person at the Apple Store pushed me away from getting an Apple TV and instead going with the Airport Express. Is one better than the other for the application that I am looking to achieve?