MPEG and linear digital audio in particular involve a LOT of data coming from your HDD.
Even if you plan to use a dedicated decoder chip, tha data will still have to pass through the processor connected to the HDD. Wouldn't it be wiser to use a processor that's more appropiate? a 80386 or 68000 at LEAST?
I work with digital audio a lot, and I've never seen anybody let a microcontroller handle the data stream. One is usually there, but only for control purposes (like the name microcontroller implies)