I have recently set up a Windows 2008 server (R1) on my home network. I'm hoping to use this to eventually fill the complete void of networking/AD knowledge and as a backup to my programming experience. I've created a set of exercises that I hope will give me a tour of what is possible.

I have installed Active Directory and (I hope!) properly set up an internal domain. For my next steps I'd to have ITunes installed on any domain client computer that I or my family log into, with my central music repository as one of the source folders for the current user.

In order to minimize space usage , I'd like to force itunes not use the feature where it copies files to the local itunes directory. I'd also like for the itunes home directory to exist in each user's user directory on the server (to minimize 6 disparate copies of music across the network). For both of these, I believe I need to use something called a "Group Policy" in order to enforce this, but am not sure the best way to approach this.

How can I most effectively accomplish this task?

Well, group policy will allow you to install an application to the machines on your network, see this KB article on how to do it.

This will install the software, however this will just do a default install of iTunes, it will not setup any of the settings you want. To get that you are going to need to supply your preferences to iTunes when you run setup. This is usually done in an unattended setup config file, where you specify a text file with the settings that you want, for the application to use when it installs. I've only been able to find 1 article on doing this with iTunes, but its pretty old - see here.

I'd take a look at www.appdeploy.com for the command line switches to be used in coordination with Sam's answer:

http://www.appdeploy.com/packages/detail.asp?id=687

This will show you how to append a pref file with itunes when deploying.