I recently built a HTPC using an ASUS board with an AMD cpu. I tried your "cheap system" alternative MB and traded it in for the ASUS M2A-VM HDMI as it had many problems with audio and some video issues as well. Unfortuneatly the ASUS board had the exact same problems (same chipsets in both boards). After fiddling with it for a month got it working. Not a perfect solution but workable. I also used the haugpauge pvr 150mce card with good results for playback...didn't care for the recording (tv) ability. Not that it was unwatchable just VCR quality at best...I could download the shows in AVI format that looked far superior...but shouldn't be a problem with your sd TV. I'd question getting the video card at this point your onboard will be enough until you upgrade your display!
I used Vista Ult. for the MCE part and with some tweaking to get different formats to play I'd have to say it was a good choice for OS....just get MCEtool to make it behave!
As for the rest of your system choices as long as the hardware behaves together you should have no problems
