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I've played with a few different options over the last year. Windows Media Center is great for most things. There are also other stand-alone options like Boxee and Roku. Each option has pros and cons so you need to find out what your specific needs are before you look for the best solution for you.

You mentioned iTunes libraries so I'll throw the Apple TV in the mix. If you are looking for something to hook up to a tv and stream movies from your iTunes library the Apple TV works great. Only costs $99, hooks up to your TV via HDMI and it can connect to your home network via wired or wireless connection. It also has Netflix, Youtube and a few other online streaming options built-in and like most other Apple products it's easy to use. It's also about the size of a few drink coasters stacked on top of each other so it doesn't take up much space or look out of place.

I have a home theater PC running windows 7 as well as an Apple TV hooked up to my main TV. Both are able to stream media from the same server I have setup in my office. The HTPC with Windows Media Center is more configurable and has options such as Hulu Plus which aren't available on the Apple TV but the Apple TV can't be beat for streaming movies, tv shows or music from my iTunes library.

I know this is a lot of information but I hope it helps.