Transcoding to MPEG4 can reduce a typical movie to 1-2 GB with surround sound and excellent video quality. Music storage is small beans in this equation.

I plan to RAID 6 320 GB spindles for a media server - the capacity should be about 5x320 or 1.6 TB, plenty for the immediate future, and the storage cost will be about $300 for the RAID controller and $700 for the disks. Not too bad.

I need to assemble a VPN/HTTP/SMB server anyway, so the other parts costs are paid for already.

Also, for those not inclined to roll their own NAS file servers in a box can be had with a nifty web interface and RAID, etc.