Remote Access of iTunes library through AppleTV

Are you limited to only playing music stored on the AppleTV HD when connected to an audio system only (no monitor), or can you use the Remote app w/ iPhone/iPod to access music from your iTunes library stored on an iMac?

I'm considering using AppleTV or Airport Express to replace my iTransport/iPod server for more freedom. The thought of being able to use my iPhone (or getting a dedicated iPod Touch) as a remote intrigues me. I realize it'll be a compromise with sound quality to some degree but I'm willing to accept that.

Thoughts to consider with the two options;

Airport Express:

Pros:

Inexpensive ($99)
Compact size and easy set up
Easy access of iMac/iTunes Music Library w/ remote App
No Power Cord (plug into VelocitorS)

Cons:

Mini Optical Output Connection (is there a high quality cable for this or is that a contradiction?)
Sound Quality (due to Optical connection/cable)

AppleTV:

Pros:

Optical Output Connection (more high-end cable selection)
Watch Movies HDTV
Easy Set Up and still compact for features.

Cons:

Over twice the cost ($329 - 160GB, but offset by more features;i.e, HDTV,..etc)
Power Cord
*Limited to Playing Music Stored on it's HD (*confirm)

Once I set up/sync AppleTV on my TV for use with the Remote app, then it's as simple as re-connecting it to my audio system. With the AE set up is even easier - plug-n-play.

If only either of these had RCA SPDIF output (like the SB3). Better yet, if only Apple would design a high-end touch screen mini iMac music server w/ RCA SPDIF output. Wow! How cool would that be. They're missing out. Although pretty soon you'll probably be able to wirelessly play music from your iPhone/iPod to your audio system. iTunes has to offer full resolution music downloads first, not this compressed garbage. Apple Lossles would do.

Note: I tried the SB3. Although the sound was great (same as iTransport) it was plagued by constant wireless drop-outs. A Sooloos system would be the ultimate solution, but so expensive for technology that's "obsolete" before you buy it. ;-)