start with installing Xfree86 and a windowmanager of your choice. If you're new to linux i suggest you to install Gnome or KDE.
After that you can install mplayer or xine for watchin movies, xmms (winamp clone) for listening to your music.
To encode movies you should use transcode, a commandline tool that can encode from every to every format.
There are a few frontends available for transcode, f.e. DVD::RIP a Perl/GTK+ app for ripping DVDs ...
To run windows apps on the penguin you need wine (www.winehq.org
) or VMWare with an installed Windows in it (you can also boot the windows on your harddisk), www.vmware.com
I hope i helped you