Before I start I want you to leave any HTPC based negativity behind, people think the HTPC is a confusing beast, well it doesn't have to be.
What is an HTPC?
Do you have media all over the place, pictures on your laptop, music on your MP3 player/CD's, films on your desktop? Well you can pull all this content together into a single place using an HTPC and have it all viewable on your PC for the entire family to share, controllable from a wireless keyboard or even an Infra Red TV remote.
My definition of an HTPC is a hub of your media + other media available for anyone sat on your couch.
The Hardware Overview
Building an HTPC doesn't have to be difficult or expensive, if you are a bit of a geek like you me you probably have spare parts lying around the house that the wife would 'love' to see get put to use or maybe your computer isn't keeping up with the day to day grind and needs an upgrade but would be perfect for sitting under the TV? Many people re-use old parts on their first build and then realise the power of the HTPC and decide to build/buy a dedicated machine. Of course if your are not comfortable building a computer then you can buy almost any computer that will fit under(or beside) the TV to do the job as well. These machines don't need to be all that powerful, just able to play a video to the standard that you need, most likely HD.
The Software Overview
HTPC software comes all different breeds but if you are new to the game or havn't tried anything other than windows before then I suggest you stick with that, however if you are a linux or mac fanboy you could spare the cost of a windows license and stick with what you know best.
Most versions of Windows include what is called Windows Media Center (except maybe starter or embedded editions), Windows Media Center will soon become your new best friend.
There are several main differences in HTPC hardware compared to your conventional PC:
Case:Now that your shiny toy is on show to everyone under the TV you want it to look nice. In fact there are several large HTPC Cases available that can house even a full ATX sized motherboard, or if you are doing things on the cheap like many then any old case next to the TV will do. Once you realise how great the HTPC is you will go out and buy a nice case anyway.
Controls:Who wants a long lead running to a keyboard and mouse on the couch? Controls are most commonly just a wireless keyboard or mouse set. If you really want a wife friendly machine look into an Infra Red remote so that it is just like using the sattellite box.
Sound outputs:Obviously you have a nice surround sound setup, right? If you tick that box you will need to look into an optical connection to your speaker setup or even audio over HDMI if your kit supports it, think about this when looking at Graphics cards.
Power Requirements:They don't need to be very powerful, in fact some people do fine with an old Dual Core processor or at a push and with no HD content a Pentium D! The only requirement really is at least 2GB memory and a HD capable Graphics card which can be picked up VERY cheap these days. Remember though that you want it be quiet, nothing worse than a loud whirring noise while trying to watch a film (trust me).
Storage:This all depends on your setup, if you will be streaming all your content across a network then you will probably only need a small Hard Drive to just run your operating system. However if everything will be stored on the magical box itself then you will need lots of space .I will mention one extra word though......backups.
As I mentioned above I suggest sticking to the system that you know best, which is windows for most of us. Once you have windows installed ll you need to do is setup Windows Media Center to begin on startup of the computer and play around, that really is all there is to it. Obviously I can't fit the playing around bit on here as it would go on forever because everyone is different.
I bet you can't do this bit with your current setup? There are several tools that I suggest taking a look at to customise Windows Media Center:
Media Center Studio