If I have iTunes minimized and I am using Safari and use cmd-tab to
select iTunes, it switches to iTunes but the window is still
minimized. I then need to go the doc and show the window or hit cmd-1
(app specific) to display the iTunes window. This behaviour makes no
sense to me and I'd like to have a hidden app display its windows when
I switch to it using cmd-tab. Is there is an option/fix for this?

I don't know a fix for your issue, but I'm 'assuming' that you switch
to itunes to stop/play, skip tracks (etc) if this is the case I would
suggest checking out iMote, this will let you control iTunes by user
defined keys like CMD+F13 or something. I hope that helps.