I've wanted an HTPC for several years and finally decided to take some time and get started.
My original idea was to build a gaming machine and have it hooked up to my TV, but then I gave it a lot of thought over several months and decided that I want to keep the gaming on my laptop (that's what I bought it for) and have a lower end PC to act as an HTPC (I have a nice blu-ray player/surround sound so I don't need it for that.) I ended up using my ASUS Eee PC Box as it is small (form factor) and has a digital video (DVI) and digital audio (S/PDIF) outputs.
Of course I put Linux (Gentoo) on it.. I have the machine up and running using a DVI to HDMI adapter and am in the process of installing multimedia apps.
So far it's working pretty well given it's only a 1.6GHz Intel Atom processor!