I'm trying to figure out how to create a 3 zone house audio system for as little $$$ as possible. My plan is to use some old stereo surround receivers as amps and source selectors. Can X10 send a specific IR command to a component (like channel up for digital audio on DirecTV). I'd like for the keypad to have a channel up and channel down button and then 3 seperate buttons for their sources.

You'll need some other hardware/software, I'd use an Ocelot and PowerHome (IMHO). X10 comands can be interpeted and the correct IR sequence sent, but this is not the perfered method, better to send the IR command directly using a IR to RF converter or a remote with these capabilities, like the MX-600 or MX-800. Or even a wired IR system.

Yes you can do this for around $250 (if that's truley considered little $$). My suggestion would be to go to Smarthome.com and purchase a Houselinc. I have one and LOVE IT, although I don't use it for IR. It is a whole house controller with software that will do much more than just help you convert X10 to IR. It will allow you to run macros (timers for your lights), input macros (sequences of events based upon button presses, like automatic dimming of lights, etc.). The main unit also has 5 IR blasters. You can define audio or video equipment and asign X10 commands to each function of the equipment. Then, the Homelinc will convert them. It costs $179. Depending on how many units you want to control, you may need an additional "blaster" called a Break Out Box, or BOB. They run around $79 each.