There is no reason why it wouldnt play straight from a USB hard drive - but it only has 2 usb ports so keep that in mind, I used both of them - wireless keyboa

There is no reason why it wouldnt play straight from a USB hard drive - but it only has 2 usb ports so keep that in mind, I used both of them - wireless keyboard/mouse and wifi. You do need to know some Linux commands, I doubt/havent tried to see if XBMC can auto-mount things inserted. But that would be cool if it worked like that. Perhaps the raspbmc distribution has the automount setup done for you. Audio quality, only had TV speakers to "try" it out with, sounded just like any other content, so I cant tell you if it suits for a high-end audio system, but the audio-over-hdmi worked with no fiddling from my side.