This is something I've been pondering for a while... You have three options:
1) An off the shelf NAS which is all complete but not cheap.
2) A standard PC box with a hardware RAID card and an array of disks (probably in a RAID5 array). Note there's a lot of very confusing terminology here and when I say 'hardware RAID' I mean a card with a processor and memory that does all its own processing for the RAID array, not a card that has the disk connectors but relies on the host processor for support.
3) A standard PC with Linux using the Linux software RAID array. Litec have a decent
mainboard/memory/CPU package which appears to meet the bill and is missing only the disks. Currently the
750Gb Samsung Spinpoint F1 appear the most cost effective. For RAID 5 you need at least 3 disks.
Starting from 1 and going to 3 they are less easy to set up and administer, but 1 will also probably give you decent performance. If you want the best of everything then 2 gives you all the flexibility you want, plus the best expansion possibilities, whereas 3 is the cheapest by miles and if all you want is to store pictures and music and listen/look from time to time then from a performance perfectly adequate.
Note that with all you should buy a decent UPS but 1 and 2 are the most fault tolerant.