Here is the skinny on building a decent HTPC (Home Theatre PC) based on Windows 7 Media Centre.
Thanks to Brucey for many of the technical details, and bringing it up from "really good" to "outstanding".
Prices and cart screenshots are from pccasegear.com.au. They have the best range, really good stock and great support. They do not sponsor me at all BTW (but are welcome to if they want to).
THE BASIC UNIT - around $500
This is the cheapest I can make it, with absolutely minimal cost, It will not have all the features out the box, can be upgraded to the big daddy eventually.
If you want to try and source all these parts from different places on the web, you could save another $50, but you will probably lose that in separate postage, as well as wasting alot of time...
If you dont mind waiting in a queue for 30 minutes, then in theory you could get all these bits MSY for around $425 (based on their parts list), however they often don't have the parts you want, and you end up buying not quite the right stuff
Rundown on each part
AMD Athlon X2 235e
I don't recommend AMD unless there is a really good reason to (in this case the 785G chipset). So this is praise indeed. This is their weakest CPU, but gets the nod as it uses the least power (45W), so will be the quietest and coolest. Remember that most of the work will be done by the ATI 4200 GPU on the motherboard, most of the CPU work is just "directing traffic" and "house keeping". Myself I use an Athlon X3... but this is for the cheapest version of the HTPC, and its $10 cheaper, and until I see evidence to the contrary, there should be no real disadvantage to using this CPU. Indeed the heat issue could make this preferable.
ASUS M4A785TD-M EVO mATX Motherboard
This is $8 more than the Gigabyte version, but it supports Sideband (SBA710), which is a way for the GPU to get better performance by going straight to the RAM rather than through the main BUS. SBA may not be available with only one memory module installed (you need an even number I think).
The AMD785G chipset is the core of this entire system. It is the one part of this system that is not negotiable.
There is a more recent verion (the AMD880) but until I use one of those, I am sticking with these.
The key to the 785 is the ATI 4200 embedded GPU. It looks great, and with the correct software will outperform just about any hardware BluRay player on the market (certainly ones that cost less than $2000 anyway).
Anyone who wants to argue that point, I simply say "x.v. color?".
Corsair VS2GB1333D3 2GB (1x2GB) DDR3
Really any single DDR3 chip that can do at least 1333 will be good, 2 x 1G would actually be better since you could get SBA running, and WM7 should manage (just!) on 2GB of RAM (althoug it will be less since the GPU will be using some of it).
Go to 2 x 2GB as soon as you can, although thats an extra $75.
Faster ram (1600, 1800 whatever) is fine as well, as long as it does not run too hot.
Thermaltake SD200 with 270WTT FTX PSU
This could be any one of many generic Micro ATX cases. I have not chosen this one for any real reason. I use an Antec minuet 300. The main criteria is it looks OK, can take a M-ATX Motherboard, an optical drive (DVD, or Bluray) and fit a couple of 3.5 HDDs as well.
It has an 80mm fan which is a good size for a tiny case. To me the main challenge for the case is to be small and silent as possible.
If you ever notice noise from it, during normal use, then its too noisy in my opinion.
Western Digital GreenPower 1TB
WD Greenpower drives run at 5400 RPM rather than the standard 7200RPM.
This makes them a little slower, but cooler, quieter, more reliable and they use less power - all important characteristics for an HTPC.
I currently run my OS on one partition of a 2TB GreenPower, and can copy large files to a separate partition on it, while playing a bluray file from another partition without issues.