Dial up internet I think was the real reason but my first real dive into self hosting was XBMC on the original Xbox. I started softmodding Xboxes as a teenager. The idea of being able to just rip stuff to my xbox and then keep it all there was awesome. I never wanted to have to stream anything because it was impossible.
Even after the 360 came out, the OG got enlisted into just playing music and movies. It'd sit there in the corner just dutifully playing streaming content from a media server. I don't even remember what was out in those days but there was something akin to plex that could stream and would attempt to transcode video.
I think it was during the self hosted podcast last episode or the one before, they had 45 drives on. They basically said the drives that you can buy from their store will be marked up and they completely expect you to buy them elsewhere.