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Here is a good video of how to make one. In my opinion, the best thing to use is plex since it has a huge community and tons of different features, along with being supported by almost every streaming device out there. You may have a little buffering using a pi, but from my experience, it works great!

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They can be used for that purpose. What type of content to you want to stream from it? How many users? Will any of the content need to be trans coded? If the media is just going to be playing directly from the raspberry pi you should be fine. If the video will have to be trans coded you may not have the smoothest playback with larger files.

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