Newbie Needs Help with Media Server and Client Builds

For the past couple of months I have been researching what it would take to add a media center server and clients to my three home theaters.  What I thought would be a simple task, turns out to be much more complicated than I originally thought.  Since I am a newbie at this I have a lot of “dumb” questions, but first here is what I would like to do:

• Rip all my 500 DVDs and stream them to anyone of my three home theaters.  For the client, I would like to browse my DVD collection from each home theater and launch a movie.  It is possible that all three theaters would be in use at the same time.
• Store and access all my pictures and music (about 4,000 MP3 files)
• I don’t have HD-DVD or Blue Ray just yet, but I anticipate I will in the near future (or even buy it for this project) so I want the ability to rip and stream HD videos too.
• During streaming of a video, I wish to take advantage of my high end audio systems (5.1 to 7.1)
• Video quality during playback is also important since I have three HDTVs: rear projection 1080i, LCD 720p or 1080i, and a plasm 1080p
• I promised the kids I would buy them the Xbox 360 elite, so I would like to use this system as a media extender.  I would need to build at least one client HTPC and use the old Xbox core system or build two HTPC clients or use two other types of comercial media extenders.
• I am currently using 3 DVRs from the Cable Company, so controlling, recording, and scheduling TV is not important right now, but eventually I would like the ability to incorporate this functionality into the media center server/client architecture.
• I have a Linksys WRT350N wireless N gigabit router with network attached storage capability

I read the post on the Perfect Media Server and the Media Server Guide, but being a newbie I am still confused on what to do.  I have some basic questions and then would like to have some suggestions on server and clients specs:

Server Questions:

• Can I use Network Attached Storage with an UPnP media server for streaming video to Xbox, HTPC clients and other third-party media extenders?
• How effective is WMP11 as a media center server?
• Is Windows XP MCE 2005 a better choice?
• I hear mixed reviews about Vista.  Should I even consider it?
• How do Beyond TV, SageTV, MythTV etc. compare to other media center server options?  Are they compatible with Xbox?
• It appears that video capture cards don’t work with encrypted premium HD channels like HBO.  Is this correct?

Ripping:

• What file format is best at providing high quality audio and video playback (ISO, Xvid, DivX, MPEG, WMV….) considering that I intend to use an Xbox, but also expect to upgrade to high def DVD formats?  In other words, does the Xbox hinder or help me? 
• What is a good ripping program that would be appropriate for my needs?

Clients and Video Players:

I looked at a lot of extenders such as SageTV, but their video output appears to be limited to composite and s-video.  Are there any extenders that support better video output options?  I suspect a client HTPC would be a better option? 

Finally, based upon what I am attempting to do, what media center server and client specifications do you recommend?  Any ideas and help would be greatly appreciated.