Good question. I knew someone would ask.
Basically, I've learned lessons from a previous build where I was building a smaller Ubuntu Server based NAS for my music collection. On that server there are a few different applications which work and some which don't and I've wanted to uninstall and install different things. In the end it became messy and a lot of things are now unused and redundant. For anyone who's followed this route before, you'll know how frustrating this can be (I'm a noob to this stuff, so mistakes are going to happen), a lot of the time, you end up wiping it clean and starting over. I don't want to do that this time!
So the idea is that the host will be a barebones config and the VM will be my media server. I can clone that at any time to work out best software to install for different purposes and features and then simply replace the media server with the new improved version at any time. This makes a lot of sense to me and will allow me to create multiple sandboxes to play with, should I need to mess about with trying alternative servers.
Granted, this approach would be less necessary with a video server than it would with the music server as there a lot more applications around for music - beets, MPD, Groovebasin etc, all worth playing around with. With video, I just want to serve it up. So now I've learned my lesson, I'll be going back and re-installing my music server once this video server is sorted.
Sorry for the long post, but I believe it's a good approach worth sharing.
For further reading: http://www.havetheknowhow.com/Configure-the-server/Configure-KVM.html (this guy is great and his tutorials have helped lots!)