OK.

After doing some testing, I have found that the following script works, but on files only. Also, the script itself must be in the same directory as the files for it to work. I also changed the extension to "mp3" only as that is the only file type I want to rename.

Code:

#! /bin/bash

rename_seq ()
{
  seq=1
  oldname="$1"
  newname="$2"
  ext="$3"
  while [ -e "$newname$(printf "%02d" $seq).$ext" ]; do
    (( seq ++ ))
  done
  mv "$oldname.mp3" "$newname$(printf "%02d" $seq).mp3"
}

ls | while read name; do
  ext="${name##*.}"
  name="${name%.*}"
  newname="${name//[[:punct:]]/_}"
  newname="${newname:0:38}"
  if [ -e "${newname}.mp3" ]; then
    rename_seq "$newname" "$newname" "mp3"
  fi
  if [ -e "${newname}"??".$ext" ]; then
    rename_seq "$name" "$newname" "mp3"
  else
    mv "$name.mp3" "$newname.mp3"
  fi
done

Could someone please help me with doing this same process but recursively from the /home/music directory and also apply the renaming to the directories as well?

Maybe I didn't explain better before, but I have my music organized in folders by artist name and beneath that, by album name.

For example,

/home/music/Beatles, The/Abbey Road/Because.mp3
/home/B-52's, The/Cosmic Thing/B-52's, The - Rock Lobster.mp3

Hence the script should search through all of the directories and rename them to 38 characters and remove any instances of punctuation marks and hyphens.

Thanks again to Sychronizer and rdcwayx for their help so far.