Time Machine is really a wireless base station with a built in hard drive, (or maybe it is a hard drive with a built in wireless base station.;-))

You can store music on it, obviously, and play from on your computer, via iTunes--but you also need the Airport Express, at least if you want a wifi connection to your stereo or speaker system--of course, it would be possible to hard wire a stereo or speakers to your computer which is wifi-ed to your music library, though not a lot of people will want to spend extra money to be able to do that--no reason for it to have any sort of analog outputs on it, since it isn't a stand-alone wifi music player.

There is a third party system, called Squeezebox that sort of does what you want, though it's not really a stand-alone either--

You're best bet is probably to go with the Airport Express, which seems to really be a wifi base station, but with analog audio outputs, and forget the Time Machine, which is really designed to work with the OS 10.5 system backup utility. Or just wait for someone to market at stand-alone
wifi music player that stores music files.