Since Semi_on touched on the technology
Hardware wise:

small quiet case preferably, esthetics count as this will go with your audio equipment:

http://quietpc.ca/
http://mini-itx.com/
http://www.soldam.com/barebone/polo_r_figaro/fav/index.html
http://www.techseekers.net/modules.php?name=Reviews&rop=showcontent&id=40&page=1
http://www.hushtechnologies.com/
- ATI Radeon card is because of its great video output and DVD harware decoding
- new motherboards today have SPDIF (Sony Phillips Digital Interface) connectors where you can connect a digital optical cable to your surround sound receiver to decode DTs and DD.
- new a good DVD software player WinDVD with ffdshow (best picture qiality hard to setup or NVDVD easy setup almost as good quality.
- PVR (personal video capabilities) capabilities using PCI cards and a very very fast CPU to capture video at a nice high resolution