Airport extreme with a USB drive. This is the first step towards setting up Airplay in my home.  The final system would contain an Apple TV connected to my home theater, an airport express connected to speakers in the bedroom, the entire movie and music collection would go on a USB drive connected to the airport extreme. For airplay to work across all this devices you need to keep a iTunes server running. I looked into a lot of NAS drives which proclaim that they have a iTunes server built in but as it seems the only thing they support is that the NAS drive shows up as a shared drive in iTunes for you to choose that as a location for your iTunes library.

So for the iTunes server you need to keep a mac running. I would be getting the mac mini as desktop; I would need to keep this running with iTunes for airplay to work.

You can argue that to keep a machine running just for serving up your library is a big wastage of power. But as it happens the mac mini is the most power efficient desktop available. It consumes less than 15 watts of power when idle and less than 2 watts when in sleep mode that is less than a typical NAS drive which registers about 18-20 watts. The mac mini also support wake on demand so it can be in sleep mode and using this feature can be woken up to serve music or movie demands.

 I have a problem of USB drive spinning down when not in use and not waking up when required. I need to figure out a solution for this. May be a NAS drive with wake on LAN feature.

Regarding the streaming from USB drive over Wi-Fi seems adequate for 720p with multi channel audio although it was a little jerky for 1080p video.  And for the copy of Avatar I have which is full high definition with DTS-HD master audio which requires more than 22mbps of bandwidth it was very jerky.

Apple TV, which I would be using to stream video, is a wireless n device, which works over 5ghz that should give me a decent enough bandwidth even for 1080p video.

Regarding the signal strength in my home theater room form the airport extreme, which is kept in my bedroom shows a signal to noise ratio of 15-20 dB which is a little on the low side but lets see if needed I can use the airport express as a network extender. I am yet to get a mac mini and apple TV, would post how this goes after I get them.