need iMac advice

My 5 years old iMac is dying, and I'm getting ready to buy a new one. My main computer is my 11" MacBook Air. The iMac I'm replacing is used for some light computing but mainly we use it for iTunes - our 650Gb music library resides on an external drive (backed up 2 different ways), and the iMac runs iTunes. The iMac hard drive is not very full, since it's connected to a 2T external. I keep archived files and the music library there (partitioned). So I wouldn't need more than the 1T drive iMac, unless it made sense to upgrade to a 2T iMac and move my iTunes library back there. I have occasional stuttering problems with iTunes (I'm streaming to 4 different Airport Express units with speakers attached) - and I'm not sure if this is a function of a) the iMac not being able to handle the load b) our ISP not being able to handle the load or c) the Time Capsule I'm using as a router not being able to handle the load.

The other thing I hope to do with the iMac is use it for watching TV/video. The iMac needs to fit on our desk, so it will have to be the 21" iMac; the 27" won't fit - but it occurred to me that I could add a 27" monitor to this setup and put it where we CAN use it as a video screen. Of course this would be really expensive: a new iMac and a new display. That leads me to the next question - should I be thinking instead about a Mac mini + 2 displays, or some other configuration? What about processing speed? Could that be affecting how smoothly iTunes plays? Would an upgrade (even the entry level iMac would be a step up - from 2Ghz to 2.7)...

Sorry so many questions, it just seems like there could be several configurations that would work and it's a lot of money to put down, don't want to make the wrong choice.