How to dynamically build a multiple taxonomy query loop within a post type’s single loop?

As per comment I also see some trouble understanding album and album media essence. You are also mixing up terminology a bit with terms and taxonomies (term is item in taxonomy).

So I am going to focus on your summary and leave to you how to put parts together:

  1. multiple taxonomy query – taxonomy queries got much improved in WP 3.1 and now you can construct very elaborate things with taxonomy parameters.

  2. loop within a loop – easier to say secondary loop, it doesn’t matter where secondary loop is. because it shouldn’t influence surroundings in any case. For secondary loops either WP_Query object or get_posts() function are appropriate.

  3. custom taxonomies and post types a little to generic point, there are plenty of nifty related functions. I suppose wp_get_post_terms() sees a lot of usage, when taxonomies are involved.

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