It can be done, but with caveats attached. This guide is for Mac only, but it should also work in principle with a Windows host for those who know what they're doing.
You need to set up the shared library as your primary iTunes library. On the computer sharing the music, you need to select the "iTunes" Folder (containing files for the library, an artwork folder and the folder that contains the actual music) and hit command-i for info. Under sharing and permissions at the bottom, you need to give write access to everyone. This is because the user account on the shared computer is different to the one receiving the music, even if both accounts belong to you and have the same name. Giving everyone write access is a security risk - anyone who can connect to the sharing computer can do what they like with your music.
Apply the change in permissions to subfolders as well - there should be an option for that. I found that I also had to click the little padlock icon so that it was 'unlocked' before it would work.
Set up sharing on the host computer. Go to System Preferences and under "Sharing" make sure "Personal Folder Sharing" or "File Sharing" is checked (depending on your OS X version). If you're on Leopard you'll need to explicitly share your iTunes folder. Go ahead and do that. Note that on this preference pane you're told the IP number or the host name of the sharing computer - you'll need that in a minute.
Back on the computer receiving the music library, make sure iTunes is closed, then go into your music folder and rename the iTunes folder to something else. That makes it into a backup for what you're about to do.
Mount a network drive. In Finder, hit command-k, and type in "afp://", then the computer name or IP number, eg "afp://192.168.1.101/". If your sharing was set up correctly you'll be asked to authenticate yourself and choose a drive.
Open terminal. If you haven't used it before it can get a bit kooky from here, but there's only a couple of steps so persist until you get it. It's in Utilities under Applications.
Type "cd Music". Type "ls". You should see your renamed iTunes folder. Type "ln -s " then the path to the iTunes folder on the shared drive, then " iTunes". All shared drives are under "/Volumes". If you're in Leopard you might be able to share the iTunes folder on the host, meaning that the path to the folder is "/Volumes/iTunes". If you're on an earlier OS you may have had to mount either an entire disk or a user account's home folder. You can type "ls /Volumes" to see the volumes that are mounted, then choose the one your iTunes folder is in and ls (list) again to see what's inside that, until you find your iTunes folder (eg "ls /Volumes", "ls /Volumes/Music" will show the iTunes folder when a user account is mounted as a drive, giving "/Volumes/Music/iTunes" as the path you put in for the "ln" command shown earlier. For example, on my system where I mount my sharing computer's hard drive in its entirety by default, I need to type "ln -s /Volumes/SharingComputerName/Users/MyUserName/Music/iTunes iTunes".
The "ln -s" bit makes a 'soft' link to your sharing computer. When you delete a soft link, it leaves the original files as they were. To roll back and delete the soft link, just type "rm iTunes" while you're in your Music folder under Terminal. Note that with all terminal commands spaces and case are important. "Volumes" is not the same thing as "volumes" on the OS X command line.
Having done that, you're good to go. Fire up iTunes and you'll see your shared library under Library->Music instead of under "Shared Libraries". All the playlists from the host computer will be there, plus video, podcasts, etc.
When you sync with your iPod or iPhone, you will receive warnings that your existing library will be erased, and replaced with the new one. I assume that's the idea, so go ahead and let it do its thing.
So - warnings. If the host computer goes to sleep or is turned off, your library won't be available. You might need to re-mount the drive if you lose the link (like, say, when you turn your computer off), so make sure you do it the same way as the original time so that your soft link doesn't break. If you have a wireless network, and loads of tunes, the first sync can take a while. If you didn't get the whole bit with Terminal and softlinks and so on I'd recommend not trying this method. There are a zillion ways this process can go askew and you really want to understand what you're doing when you open up security holes like giving world-write access. Geeks only, please.
I haven't tried sharing from Windows, but the steps on the host would theoretically be the same. Share the iTunes folder, give it world-write access, then use smb:// to mount the drive on the receiving computer instead of afp://. Of course, there could be grievous differences between the iTunes libraries on Windows and Mac; I don't know.
If you want to back out and go local again, you can just delete the soft link (you can do it through Finder or the Terminal, whatever you like) and rename your old iTunes folder back to iTunes again.
