Ed, that is a great question. I can answer what I like and what I don't like about the Apple TV set up. Hopefully someone a little more technical can fill in as we go.
I use a Mac and I have an Apple Airport Extreme (APE) that I use for my wireless network. I threw out my Linksys wireless router after a year because it kept dropping connections and I HATE trying to make computer stuff work.
Using a Mac and The APE made life a lot easier for me and now I can add ATV's like candy. I just got another one to hook up today.
The features that I like are as follows:
1) I rip all my cds to AIFF or Apple Lossless format so I have high quality music on all of my systems.
2) I set the volume control on itunes at the mid way mark, then I set the volume on my pre amp at the level I pretty much want to hear. This arrangement lets me control the volume with my ipod or ipad on any system, whether it has a remote or not.
3) I can select songs or playlists on my ipad or ipod
4) itunes is pretty easy to use
What I don't like about the ATV set up is:
1) I can't or I haven't figured out how to copy SACD or DVD formatted music for 5.1 music formats.
2) It's Apple, life would be a lot easier if they supported more open source formats like FLAC or DVD audion
As far as I understand you need a 1) PC or Mac 2) wireless network then you can hang hard drives off your pc and use itunes.
You also need a DAC. My first one was a Cambridge Audio Magic Dac. The next three I bought were Eastern Audio's Tube DAC
http://www.morningstaraudio.com/shop/category.asp?catid=6Understand this abouts DACS, under no circumstances would I ever dream of paying more than $100 for a DAC. I mean all it needs to do is connect your stereo to a digital source, right? The first one I heard was the Magic DAC. It sold for $420. The difference it made over using the DAC in the ATV was like night and day. This changed my opinion on why I would spend that kind of money on a DAC.
Then I heard the EE Tube DAC. Again a major improvement over the Magic DAC, now I am stuck spending $750 each time I need a new DAC.
It may seem overwhelming at first, but i would suggest starting small and adding features and components as you seem fit. The end result a sound system like you can only imagine.
I would think at a minimum to get started you would need a:
1)wireless network
2) An ATV
3) An inexpensive $100 DAC
Then you can tweak and upgrade your system. That's half the fun, it took me a year to get from my first AirPort Express to where I am today. As you make changes to your system, you will hear the difference and that is where the fun begins.
It would be nice if you lived near someone where you can go and see a set up. You'll pretty much want one once you see and hear it
Other solutions I would like to hear more about are:
Logitech Squeeze Box
Sonos
Synology Home NAS
Vortex Box
Tinpan