First, let me apologize, this is going to be a long post.

Alright then, Here's what I have currently:
1 Server: 1 WD Raptor (150GB, 10k RPM) + Raid 6 Array, 5.5TB usable
1 Xbox 360 Elite
1 BD player
~1500 DVDs, ~400 ripped DVDs (h.264 mp4), ~15k mp3s
4 PCs, 2 Notebooks
4 rooms with TVs, 2 1080p capable (hdmi + component), 2 older tube tvs(Composite+Coax)
1 5.1 Surround setup in the living room (low end Yamaha)

Here's who I am. I love music and movies, but I'm not that concerned about quality. Since we have some 1080p capable tvs right now, I'd like to be able to stream 1080p, but I'm flexible. I'm NOT an audiophile, and I'm perfectly happy with my low end satellite speakers in the living room. Most of my music is encoded in 192-320kbit mp3 format.

Here's what I'd LIKE(I understand I'll probably have to compromise somewhere to get something else. I'm open to suggestions which include most of my preferred features) from the server:

1)Suggestions on what OS/Media Software to use. I am comfortable in all flavors of nix/windows. I am willing to spend the money on any version of windows which will allow what I need, or even try windows 7 if someone has a legitimate reason to do so, but I do most of my work in nix, so I have no qualms about saving money using a free option. I also currently have vista ultimate 32 bit, and multiple xp pro, server 2k3/server 2k8 licenses.

2)The ability to open up network shares so my fiancée and I can watch a movie on our notebooks, or setup a netboook for the kids to watch a movie, etc. (I should be able to do this using the OS, but I thought I'd make it clear that I need it.)

3)Web streaming. Not sure this can be done. I'm currently using tversity to stream to the 360 and it allows this (sort of).

Here's what I'd like from the settop boxes:
1)Easy interface. I have small children (capable of loading a DVD, or changing the channel on their tvs). Ideally, the front end interface will allow them to load a "kids" directory on my SAN which contains all their movies.

2) Same interface in every room with a TV. (for the same reasons as above). This can be avoided in a couple of scenarios I'll explain later.

3) Cost. as I'd like to have this in every room in the house eventually, I'd prefer to keep each unit in the sub-$200 range.

4)Ability to stream DVDs from the video_ts directory rip. I prefer to keep the DVD menus and special features intact, if possible.

5)Ability to watch h.264 mp4 files(Many of my current rips use this, so they play on the 360 natively,) and play mp3s

6)Gigabit ethernet. This is not as important now as in the future, but I'd like to not have to upgrade in a year.

7)Future expandability - my current server has an 8 port hardware SATA raid card, and as larger storage becomes cheaper, I plan on upgrading. I'd like to be able to rip and stream blu-ray to all the wired devices in the house.

8)Surround sound. I have not done any research on this, and have been largely out of the audio scene since 1999-2000. I am not sure that this can even be streamed over the network.

Here are some things that I see commonly that I do NOT need and therefore have no interest in paying extra for:

1) Wireless - I will be running cat 6 cable where I can, and I can bridge one of the many routers for the couple of tvs I can't reach for now.

2) Hard drive - Since I already have so much media and would like to be able to stream it throughout the house, I see no purpose in having local storage on each system

3) Portability - I have no need to move this unit from one room to another, as I intend to install one in every room with a TV.

One last thing:

My fiancée and I are planning on buying a house later this year. To give you an idea of what we're looking at adding, the playroom will probably get a new 37" LCD, and the office will probably get a 32" LCD. (In addition to what we have now.) If we buy a house with a pool, I'd like the back deck to have a 37" also.

Any suggestions are appreciated. This whole thing is so overwhelming. I started doing research, but figured I could get better pointed in the right direction from people who have already been there and done that.

Thanks for reading and sorry for the LONG post.

wow... long post...
OS - doesn't matter so much...
audio I would do separate - look at either Squeezebox (http://www.slimdevices.com/)or Sonos (http://www.sonos.com/)... not so much from a better sound quality point of view (although they probably do sound better) but more from a usability point of view... ie why turn on a TV to Listen to music? and well, they just work better...

have you looked at SageTV (http://www.sagetv.com/)and their extenders? its the only one that I know of that is fully integrated with a PVR... but I haven't been following them all that closely...

Thanks for the reply Somewhatlost. After spending some time looking over these forums, I've decided that the PVR functionality is not that important to me, and have taken it out of my original post.

SageTV does seem to do all that I want, and I'm curious if there are other alternatives that achieve the same results.

As for sound, since quality is lower on my list of priorities, I don't see myself spending another couple hundred dollars per room to add sound capability, as long as the TVs can access the same library.

Thanks again for your input

Thanks for the reply Somewhatlost. After spending some time looking over these forums, I've decided that the PVR functionality is not that important to me, and have taken it out of my original post.
then you are really missing out... PC PVR's are so much more fun the regular old boring PVR's...
automatic commercial skipping is the best... no buttons to press, it just skips them on its own...

SageTV does seem to do all that I want, and I'm curious if there are other alternatives that achieve the same results.
I am sure there are other similar solutions, not sure there are any the same though... but if you really don't want a PVR, then PCH or one of the other Network Media Tanks may work for you...

As for sound, since quality is lower on my list of priorities, I don't see myself spending another couple hundred dollars per room to add sound capability, as long as the TVs can access the same library.
again, my recommendation has nothing to do with sound quality... its all about usability... the whole how do you browse your music? how easy is it to find what you are looking for? how do you select it to play, how do you build play lists, how hard is it to change a currently playing play list...

if its too much of a pain to play songs, then no one will ever play them, except under the most dire circumstances...
all that pain and suffering, just to save a couple hundred $$? seems like such a shame... but hey, its a choice you and your family will have to live with, not me, so whatever you choose will be right for you:)