Hiya Matt,
I agree about making things as clutter free as possible, I personally set up windows to work the exact same, my IE toolbar is totally done the same too with like the address bar put next to File/Edit/View etc. I love things to be clutter free and efficient to use.
The problem is though, if it's like this to begin with then it's hard for beginners to use. Big bold buttons jump out at us and make things easy to realise that it's there. A Big drop target would jump out at new users and say: Oh, look at me, use me, find out what I'm for. Users would then play with it within the first day or two and realise what a great feature it is. If there was then an option to resize it, users would realise what a great feature it is, work out how to use it, then resize it and tuck it away somewhere nice for them to use efficiently and quickly and for the users who will never be anything more than infrequent users they will leave it as big as this might suit their needs.
Take a look at this screen shot:
(I shrunk the screen shot to 1/2 size to make it fit better on most browsers and to not make the file too big)
If you look at the actual drop target on my resolution, it's tiny and looks more like a title for that section of the screen rather than an actual feature.
I think you need to just make it big as default with an option in the right click menu to resize it to one of three sizes, big, medium and small. I like things clutter free but for me personally even the size right now is too small. I think I'd put it on a medium size (maybe 1.5 or 2 x the current size).
For the searches, if you did it with a drop down list followed by a text input box, the first entry in the list that was selected by default could be: Search all fields and then any text inputted into the text box would work the exact same as it does right now therefore not stopping the power users. It would also contain stuff like: Title, Artist etc so a user could select artist from the drop down list, then type text in the box and it would just search artists. This would be ideal for the beginner.
The advanced tab could then work the exact same way it does where users can build up search strings.
By just adding the drop down list which wouldn't change the GUI much I think you'd make it seem a lot friendly for beginner users.
Also, for the advanced when we go to add a rule: Firstly I'm not sure if the word Rule itself is the best to use, Add Search Criteria or something makes more sense but that's a small detail, the main thing I wanted to say about this is the: Do What with selection: Play/Skip. These definitely dont strike me as the right words, when I first saw them I thought it was instantly going to just play anything I chose or skip it from my playlist. I think more appropriate would be: Show/Ignore or something.
Skip and Play refer too directly to listening to the actual music rather than finding it.
For the options screen I think you have the right idea
For Search Criteria on View Schemes, this is an area that definitely relies on the user knowing what to do a little too much. I think after the text field you need to have a little one of those cute '?' which when clicked explains a little what it does including some examples and possibly a list of all the syntax that can be used. Also, I think that screen in general, along with most others, should have a direct link into the help file explaining the screen as I still haven't worked out yet, even by playing (I'm sure I could if I read the help file but like a lot of users we do that when we're having problems, not when we want to learn about features) what 'Artist Album' is for. When I use it I seem to get the same trees as if I'd just used artist.
Also, there should be a button after it with like a wizard or something (similar to the 'advanced' button on the searches) that helps the user to build it up.
I think one of the easiest ways you guys could work on the GUI and general interface to improove it the fastest is to get someone into the company one day who's never used MJ before but who's reasonably computer literate (just to a normal extent, not a power user) and just get them to play around and see what they have a hard time with and what doesn't make much sense to them.