Thankfully, third-party developers are more open-minded about this kind of thing. Currently there are a couple of media-center applications that you can use to control not only your locally stored music, images, and videos, but also Internet-based media streams: XBMC and Plex.
XBMC is an open-source media player and entertainment hub. Plex is an application and interface built on XBMC's technology. Of the two, I find Plex easier to use thanks to its slick interface and the ease with which you can add not only local media, but also Internet streaming services such as Hulu, The Daily Show, PBS, YouTube, Vimeo, Netflix, Amazon Instant Video, Pandora, Shoutcast, and Spotify.
Using Plex with your local media means configuring the separate Plex Media Server. This is a free application and one that isn't difficult to configure. You choose the kind of media you'd like to add and then tell Plex where it's stored. It will make sure that it appears in the Plex player.
Once you've added the streaming media channels you desire as well as the music, movies, and images stored on your Mac (or a local network server), you can navigate to them easily using the Apple Remote, a keyboard, or one of the iOS apps I mentioned. The Plex interface consumes the entire screen, making it seem like you're working with a dedicated media player rather than a computer.
Regrettably, Plex can't play all the media you might want to access. For example, it won't play copy-protected media such as the movies and TV shows you've purchased from the iTunes Store. It also lacks on-demand content such as HBO Go or a cable or satellite service's catalog of streaming movies and TV shows that can be played in a computer's Web browser.
Simplifying the interface
If you want to play such media, you must leave Plex, which can cause a problem for the family because they're now confronted with a computer interface, which less-savvy users may find confounding. There are some simple (and not-so-simple) things you can do to make the experience easier for them.
The first is to place aliases of applications and sites they'll want to visit on the desktop. For example, you might hold down theandkeys and drag iTunes from the Applications folder to the desktop, thus creating an alias. If you wish to watch HBO Go, launch Safari, travel to www.hbogo.com, and then drag the icon from the address field to the desktop to create a Web location file that, when double-clicked, launches your browser and takes you directly to that site. Alternatively you can create a folder full of aliases and drag them to the dock. Instruct your loved ones to click on this folder and then click on the site or application they wish to launch.
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