Hi Arch,
There are a lot of permutations when setting up a home media solution. I'll kick off with a few thoughts and you can see what sort of approach appeals.
1) A HTPC is a PC which usually connects straight into a TV for playing. It can also act as a central server for storing files to send out to other devices. You can google some great HTPC DIY guides but FWIW if you're not very techy a HTPC is a reasonable undertaking. If you want to build one as a hobby it can be a fun challenge but its not for everyone. Also you need to have a big PC on 24/7 in your living room generally.
2) You're correct on what a NAS does. Essentially its just a dedicated harddrive that is on 24/7 and uses about 10W an hour and is silent. They send data around your home. You can get a cheap 1 drive NAS but as a startup I'd suggest getting a 2 drive (bay) NAS and configure it to mirror the hard drives. That means if one of your hard drives fails there's a second duplicate copy of all your data.
3) Good NAS options might be a QNAP like this one or a SYNOLOGY. See this
thread. A NAS is also good for being a backup of data on other devices. Modern NAS also have a lot of additional server features like being an iTunes server etc. that you can investigate.
4) Instead of a HTPC there are plenty of Media Players that cost $100-$300 and have great interfaces. Popular ones include
WDLive, Popcorn Hour, and the AppleTV. If you like a very nice customisable display then a big free favourite is
XMBC
5) Note if you want to add wireless to the mix then you usually add a wireless router into your wired network. I'd also recommend you stick with wired where possible (say between your NAS and Media Player) as its a more reliable connection.
5) Personally, my solution involves a
QNAP NAS. A $100
AppleTV with
ATV Black installed on it and running XMBC.
Regards
Peter Gillespie