With all my music safely stored on the Windows Home Server (and Amazon S3 courtesy of Jungle Disk) I installed the Home Server client software on the wife's laptop (so it would get backed up). I mapped a drive the Music share and then told iTunes to "Add a folder". I pointed it at the mapped drive and that was that. I was quite surprised just how long iTunes took to "add the folder". It appears to scan all the file names, metadata and probably a whole lot more - either way it is very intensive on the network and takes far longer than you'd expect. This makes it annoying that it is not very multithreaded. Of course adding music to this folder other than through iTunes means that, by the looks of it, we have to keep telling it to add this folder. It is not very good at automatically keeping up to date. Seriously - what is the fuss about iTunes? it is a ~70MB fat client app that seems to struggle with the basics. Importantly though, iTunes knows about our WHS music repository and can therefore create play lists and sync them to the iPod. Success with gripes!
I then fired up the XBox, navigated to the "Media" tab and chose to add a media source. It had already detected my Windows Home Server. That was it. I then clicked on the "Albums" list and it thought about it momentarily before displaying all the albums. The experience was the same when selecting "Artists". Either way - significantly faster than iTunes. What is quite nice is that whilst it is playing an album you can go back to the "Media" tab and navigate to the photos stored on the Windows Home Server and kick off a slide show of a folder and all its sub-folders. It was nice to have the XBox playing music whilst slide showing all the pictures of the kids.
I haven't tried to show video content on the XBox yet.