@Bonch: Congratulations, you are officially the Grinchy douche on Christmas.
OP: Great questions, I can not wait to see answers. Would love to hear more about what your software solution is for encoding, I've got a bunch of DVDs & Bluerays I would really like to get on the network, but a streamlined rip+encode+publish I have yet to achieve :-/ What are you using on the frontend? I've got various iDevices roaming about, and a Roku that does 720p for the projector, but haven't had much luck with mt-daapd so far.
I do not trust wireless for my projection room, I ran cat 6 everywhere when I moved in as nothing beats the reliability of copper. I've got a basement, so I put the server is right by the patch panel in the furnace room. Noise is definitely an issue. The only thing that scares me about the garage is bugs and what not gumming up the cooling enough to cause catastrophic failure. With a bunch of drives you need a bunch of airflow to keep everything cool, I can just imagine the intake fan sucking up mosquitoes, and coating the CPU cooling block with my dog's blood.
As far as rack vs tower, I started with a rack and ended up with towers. The rack systems just took up way too much floor space, and that space was poorly utilized to boot. It made a very large utility room feel much smaller.