@fionasara, couldn't have put it better myself.
Since being all for apple stuff about 3 years ago, I have come to absolutely despise Apple and everything with an "i" in front of it. They want you to use the stuff that you've bought in their way, and their way only.
I am currently trying to figure out a way of streaming music stored on my NAS to my girlfriend's iPhone, and it would appear that it cannot be done through iTunes. Instead, I've got to look for third party apps to do this, and all of those require iOS 4.2 or later. Her iPhone is iOS v.3.
So basically, it cannot be done. My solution is to recommend she replaces her iPhone with an Android.
I would therefore recommend the following set up for anyone:
Keep iTunes on your desktop computer (Mac or PC)
Store your music on that computer's hard drive
Set up a sync (using something like SyncToy) to "back up" your iTunes library to the Multimedia\Music folder of your NAS
Get Twonky Server up and running on your NAS and stream to your other devices from that.
I am not following my own advice. At present, I am storing my iTunes library on the NAS. This effectively means that there is no local copy of the music on my Mac Pro. OK, it saves me having to store 300GB of music; but what's a 500GB HDD these days... about £50?