How do I build a cheap home theater pc?
Solution 1:
Still valid and even cheaper now
Personally, I would switch out the antec minuet case for something a little more expensive from Antec. I have the Antec Fusion case and it works very well. Buy a diNovo keyboard for it as well and it's perfect. (keyboard is expensive, yes, but worth every dime)
Solution 2:
I built the PC @Stefan Thyberg links to with some variations (750gig HD, Blu Ray drive, Solid case). Having lived with it as my primary means of consuming media for several months I would not do it the same way again.
There are many reasons for this, mostly though it is a pain to use. There are things for which the version of Windows Media Center on Vista are not well suited such as watching high definition movies or watching online media (i.e. Hulu, Netflix). I tried several of the free downloadable Media Center alternatives and found them all lacking in one way or another. It took several weeks of tweaking before my wife could watch a movie on the damn thing and she has a PhD.
Then there are the trade offs between processing power and aesthetics (sight and sound in this case) as well as consumption of electricity. Reading and processing large data streams would cripple the machine and I would occasionally get lag watching Blu Rays even with it offloading to the GPU. Then there was an issue with the ATi chipset not playing well over HDMI with my TV (brand new Samsung LCD) or my reciever (also brand new and HDMI compatible).
In the end, this setup is not even expandable. If I want to watch at another TV in the house, I need a whole other PC. If my original drive starts to get too full, I cannot add another drive to this system directly without upgrading the power supply and getting a larger case.
Instead I would have gone whole hog on a really powerful machine (dual or quad core at 2.8ghz or higher, 4 gigs or more of RAM, several fast hard drives, multiple network cards) with a cheap and ugly case that would sit in my basement. Then, at each TV I wanted to have access to the media server from I would put an AppleTV. With a powerful central server and a glorified, wifi and HD enabled mini-box setup I can expand to additional TVs for $250 each and can continue to expand the storage of my server without buying a new case.
Solution 3:
I also basically followed the Coding Horror media PC specs referenced by Stefan but put in 4GB of RAM (probably will upgrade to 8 soon) and added a Clear QAM capable tv tuner card from AverMedia.
It's been a very solid solution and is working superbly since I recently upgraded to Windows 7 Home Premium 64bit.
That said I do still prefer using my XBox 360 to watch steaming content from Netflix. The plug-in for Windows Media Center is klunky.
Solution 4:
I would suggest if you want mini-itx and want any chance of playing HD content ever, you'll need something a little meatier like a nvidia 9300 or the chipset in Stefan's post
the zotac ion board in the mini-itx store might well be exactly what you're looking for too... it's not as cheap as the bundle you posted but will be a lot more capable...
edit: except the ion doesn't have a pci slot so no space for an encoder card :(