Have you seen Icecast [1]? You create playlists of local music, then play them with something like mpd. Icecast then streams them out and clients like VLC, xmms2, and even older versions of Winamp can stream it.

I set this up for all my music in shuffle mode for my own radio-like always on streaming service via Tailscale.

1. https://icecast.org/faq/

I’ve wanted to try something like this with a Pi or something else running Linux. Is mpd a good choice for that scenario? Does it support being able to use custom events eg a button on the gpio for play/pause?

mpd is a great choice, there are lots of things built around it. Essentially, you'd have the GPIOs trigger mpc commands. mpc talks MPD over the network back to the mpd server, so you could have physical controls all around the place.

There are lots of examples online of people doing this sort of thing. There's a simple example at https://github.com/pablodo/mpd_gpio/blob/master/main.py

Even a chapter of a book about it: https://link.springer.com/chapter/10.1007/978-1-4842-2406-9_... (I just found this, no idea if it's any good).

And also an IR version at https://www.ziemski.net/rcmpd/