Media centers are great. I'm also happy to answer any questions. We've had ours going since 2006 I believe, with Win XP Media center edition. Now running Win7.
I will point out you can do it with much less powerful equipment then R1 lover. Almost any dual core (not Atom), is a fine processor for doing a media center. I'd avoid a Pentium 4, but any of the Core2Duo or newer, or Athlon X2 or newer on the AMD side should be fine.
2 Gigs ram minimum, 4 is best (and it's dirt cheap now so why not).
Your most critical component to smooth video playback is your video card. If using a integrated (built in to motherboard), you want a minimum of an Intel 4500. Anything from ATI and nVidia will be fine too. My media center has an older ATI x2600 in it, and it's plenty powerful enough.
Noise is a big concern if you are going to have this thing sitting in your living room. So look for quiet fans for the case and processor, and a video card that has passive (no fans) cooling.
My setup is a little different than r1lovers. We do get 3-4 HD channels over the air (attic mounted antenna), but I only use that for watching Hockey games
. We have analogue cable, and I have 3 tuner cards in my Media center, so we can be watching 1 show and recording two others. We use that for our day to day TV. It's not HD, but its fine for us.
On top of TV, just having a PC available all the time is nice. When friends come over with digital photos, we just pop their memory card into the media center (ours looks like a normal piece of AV equipment), and it comes up on the big screen. Screen saver is also nice, it rotates though all our photos. I also have it linked to the server in the basement which has a couple hundred movies and several TV series on it that I download (motoGP, WSBK, etc).
It's also convenient to have the PC there because my wife and I play video games together, so we can have one of us on the laptop, and one on the big screen playing.