The last word in being able to play anything movie/clip wise has to be mplayer, although xine is pretty good for menu's too. And for music files, there is the mighty xmms, which can handle mp3, ogg (unlike windows media player unless they finally fixed it!), wma, wav, whatever you like..
I love linux, been using it for at least 6 years already,in fact tommorow my wife's parents are migrating to it because I can lock it down to just do mail and web and make it so they cant harm it, yeah I know you can do this with xp and admin priviledges, but its what I know right? I forked from windows after the debacle that was 98/nt4 and only briefly toedipped with windows ME, no wonder Im put off. Even my console runs linux (xbox running Xfedora, and another running xebian)..
The xboxes are actually front ends for my media centers (using mythtv) and sit on our projector and bedroom tv's so we dont have to have "proper" computers in there, and I use them to watch live tv (capture cards are in a monster box hooked up to the satelite dishes), general pvr frontend, access my video collection (its shared with nfs, listen to the cheer from the solaris crowd), access all my music, pictures, weather reports, news sites (bbc, slashdot

And our house runs 24/7 on a old p200 laptop with a dead screen, it watches a dallas ds1820 sensor network spread through the house and switches the actuators for each room according to as if its at the correct temp or not, and we can set each room temp on a 30 min resolution and it can control our lights too, has a neat little web interface so it doesnt scare visitors with any command line stuff if they need to alter something. All homebrewed from lumps we already had and some ingenuety. Its just under 3 years uptime at the moment with no reboots or fallovers. Thats what linux really allows, sure itll work fine as just a dumb windows replacement but when your ready (if you ever get that ready) you can lift the hood and tinker with the innards just as much as you want. It wont hide stuff and I find it lets my creativity out too.I do have a xp machine, so I can use it to run autocad/solidworks natively, its just too much of a monster to use vmware or the like (virtual machine software) and Im not a os snob since sometimes clients insist because of corporate policy we have to use a certain type of machine (hire consultants then tell them how to work, not good).
For walking round the house I use a ipaq... Reflashed with the familiar distro of linux of course :p Id love one of them tablet pc's your talking about, just so long as I could get rid of the original operating system that is

I should offer the disclaimer that Im a programmer/infrastructure engineer with unix and routers etc by trade so much is second nature now, but it wasnt always that way. Only way you'll learn..