I've been running a microsoft windows media center htpc configuration for about the past 6 months -- it serves as my video playback system for video (hard-drive-archived dvds that I've rented from netflicks, dvd-format live shows I've collected from various sources and for live/recorded tv via windows MCE) and for audio (using foobar2000 to play my shn/flac collection via spdif to my sony strda5000es.
So far I've had a lot of fun with this setup and have, after getting everything stabilized, had a lot of luck with it.
I'm running this all on a fairly modest, but current, setup -- specifically a dell sc400 using a 2.8g p4, 512mb of ram and a pair of 160gb seagate hdds (in the htpc), as well as around 600gb of storage on other networked computers in my house. I also have a hdtv card installed and can use the htpc to watch/record over-the-air hdtv broadcasts
I put mine together for a pretty minimal investment (dell sc400 ran me $250, video card (ati radeon 9600 - fanless) another $75, tv reception cards $40 fo normal tv, another $100 for hdtv and a soundcard with bit-perfect spdif out (chaintech av-710 for an additional $25)