Apparently under iTunes 5, there is no way to disable the Music Store entry from within iTunes' Preferences section -- in iTunes 4.9, you could uncheck a "SHow iTunes Music Store" box, and the store would vanish. So here's a workaround for version 5. In a Terminal window, enter the following for the same effect:
defaults write com.apple.iTunes disableMusicStore -bool YES
Make sure iTunes isn't running when you run the above command. Restart iTunes, and the store will be gone from the Sources panel.
Mac OS X Hints
http://hints.macworld.com/article.php?story=2005090812032453