OK, I worked it out. You can either synch your Apple TV box to iTunes (like an iPod), so you don't have to have your PC on to watch/listen, or you can stream it over the network (wired or wireless). The former obviously means that the size of the HD you get will be important (there are various up to 160gig), which will depend on how much music you want to synch and at what quality.
A demo of the interface is here:
http://www.youtube.com/watch?v=4itNWe27d38
Note that a key word here is 'iTunes' - you need to have your music in there, not windows media player. If you've burned all your tracks using mp3, then this isn't a problem. If you've used WMP, then you'll need to convert them - iTunes will do this for you or you may wish to re-burn them for optimal quality.
As for sound, are you hooking it straight into the TV or do you have a separate AV setup? If the latter, the Apple box has an optical out which may sound better through your AV amp than the RCA outs, depends on the quality of your receiver.
cheers
jd