I have my iTunes set up with the entire library in /Users/Shared/Music, including the iTunes Music folder with the iTunes music library. And then I set my iTunes > Advanced settings as this : iTunes Music Folder Location - iMac:Users:Shared:Music ; And I checked both "Keep iTunes Music Folder Organized" and "Copy Files to iTunes Music Folder" or something like that. Now when I add a song to iTunes, the library file in /Users/Shared/Music/iTunes is changed, and the music is copied into the /Users/Shared/Music folder, so when my brother logs on and his iTunes settings are the same as mine he can see all the songs I can see; and when he add's a song I will be able to listen to it when I log in. One thing is that if he listens to a song, the play count on my library changes too.
It works great - my whole family shares music. I'm gonna give both my brother and sister gift certificates to iTMS for christmas, and then listen to their music ;^)