Background about me: I'm an uber-techie, and late iTunes adapter/hold-out. I don't like AAC or the way iTunes takes control of my music collection. I like to download songs from various sources and all of them in MP3.
What I have: a 30g Ipod, an iPhone (3.0), an AppleTV, network shared drive with my music collection, and at least 2 computers that we will call Server and Client for lack of better terminology.
What I want: to be able to run iTunes independently on Server and Client while sharing the same music folder database so that I can plug-in a FIRST ipod into CLIENT and plug a SECOND ipod into SERVER and just have everything work. Oh yea, and have my AppleTV sync my songs.
So here's what I did...
(1) On 500g external drive I have a root directory named "My Music" & turned-on full access file sharing, which can be a bad thing if not behind a firewall.
(2) Cleaned-up my mp3 collection on SERVER using Magic MP3 Tagger to organize ID3 tags and directory structure, e.g., My Music\Artist\Album\track-title.mp3
(3) Installed iTunes 8.2.1 on both SERVER and CLIENT. You have to run at least 8.2 to work with the iPhone 3.0 (newest).
(4) Set options on SERVER iTunes to manage my music myself and pointed the collection to E:\My Music, where E: is the physical drive location assigned by Windows XP. Make sure your iTunes library is here too.
So far, pretty simple and straight forward...
(5) On CLIENT, map the network drive \\SERVER\E$ to E: so that E:\My Music on SERVER looks the same as it does on CLIENT. I think this is a key step because it seemed to have been the magic sauce in this recipe.
(6) On CLIENT, hold shift-key down while selecting (clicking) the iTunes icon so that iTunes asks which library you want to connect to. Select E:\My Music\iTunes\
(7) On CLIENT, Edit->Preferences, under the General Tab, make sure "Import Settings" is for MP3, rather than the default AAC. Under the Advanced tab and make sure your music folder location is E:\My Music, and that the boxes for "Keep iTunes Music Folder..." and "Copy Files..." are checked. Under the Sharing Tab UNCHECK "Look for Shared libraries" and "Share my library..." You don't need these and they causes confusion.
(8) On SERVER, I have "Look for Shared Libraries" unchecked, but "Share my library..." is.
That should do it. This allows the FIRST iPod and the SECOND iPod to load the same music library. Also CDs inserted into either computer will propagate to the common drive/library.
Let me know if you have issues, or know of a simpler way to do what I did.