1. I've done it and it works fine. If you havent already moved your files onto it, then like JimH says, just use the "Rename files from properties tool" on your audio files to move them all to the "Audio" share.
2. Once you've done the above, your computer, and any other in the house will always be playing the same files from the server.
By extension, if you copy your MC library file onto the server (File>Library>Library manager, Add library to a new folder in your "Public" share on the server and make sure it clones your current library) and then always load MC with that library by default, then you can access, and update that same library from any PC in the house so that each PC is always seeing the same, most recent info for your files (obviously you need to tell MC on the other computers to load the server version of the library too).
To install MC on the server itself (so that you can use library server to serve music accross the internet to other computers running MC elsewhere) you need to use remote desktop on your computer to connect to the home server. Once you are inside you can install MC as you would on your normal computer, and then you need to tell it where the library file is and turn on library server. If you put the Media server link in your startup items list, then even when the server restarts (after automatic updates etc.) MC will load again without you having to remote desktop in and start it yourself.
I don't know how to get Media server to start with the library in read only mode. If anyone else does, I'd appreciate directions.
If anyone knows how to schedule a library reload (in readonly mode), that info would be greatly appreciated too.