A {new, refactoring of a current} media project, looking for suggestions

I have been following this site for quite awhile and thoroughly enjoy the open discussions that take place. It seems as if the community has great insight and experience to share with each other. For this reason I have decided to sign up and post my first question regarding a situation I am currently in and looking for suggestions on.

My friend and I are graduating in a week with our BS in CSE and we have big hopes for our future. He currently has a home theater setup which contains a centralized server running a web interface for easy access remotely and also allowing for his friends to access his content. Additionally, he uses Acer Revos as thin clients running XBMC to access the house throughout his LAN. After seeing his setup I was sold and wanted to do something similar, yet BETTER!

He and I decided that after commencement next week, we are going to start from the ground up and do the project right. Currently his implementation and XBMC configuratino is just months, years of trial error and building based on what he needed. Therefore the code base is poor, and overall there are a lot of things he has said if I had the chance I would do them right.

Him and I have decided that we are going to start with formal requirements, documentation and design and then start coding. The hope is that this project will be open source, iterative and agile in development cycles such that we can continually produce working features to incorporate with our existing production system.

I am looking for thoughts, suggestions, comments on how a two man team can make a project great? This can be relevant to a media server based project or just any general start-up project for that matter.