Man, that sucks! I had a similar itunes problem, as my 2010 Mac Mini started doing the same thing last year. At first, the skips seemed pretty random, but I finally noticed that once it started skipping, they usually occurred about 6 seconds apart. Adjusted the buffer, no help. Next, I thought I had some corrupted files but all files played perfectly on my ipod. I set up another user account, installed a fresh version of itunes, downloaded a few new songs...and still had skips. I chased this problem for a few weeks, as nothing seemed to help. I grew increasingly frustrated, just as you are now.
Just before I sent the Mac Mini in for service, I removed the two 4GB Crucial sticks I had installed a few months earlier and replaced with the two original Apple 1 GB sticks, as the Apple Service Center has to have it in "as new, non-modified" condition. After looking at it a week, Apple can't duplicate the problem, so they reinstall the OS after making sure I had all files backed up. Get Mini home, reinstall files...no skips. Apple Service told me it was probably a corrupted kernal. Really? I wonder if I got a bad memory stick. Curious...did you recently upgrade your memory?
Anyway, I give the Mini to my young daughter, and I go off to buy an iMac AND a Dell fanless netbook to use as a dedicated music server. No issues thus far...well, except for a whining daughter that says her Justin Beiber songs are occasionally skipping.
Keep us updated!