I would think a 200 would be plenty fine for playing mp3s. Not sure on the movies. 2.1gig HD isn't going to hold a lot of music, so I assume you'd network it to a server to store most of the music? Not sure how well a 200 would play with a wireless network, but hardwired would not be a problem. 32 megs of memory looks a little light as well. I think you'd want to boost that a bit.
edited to add...
I see Chris posted while I was composing this...I was thinking from a WinCAB perspective. IF you have DOS drivers for the touchscreen, then system should be fine if you run DOSCab. (with space limitations listed above...although 2 gig of music might be more than enough if you only took the song you like from all your ripps)