I gave up on HTPC. Software costs can be a bit crazy and im cheap bastard  There are some really awesome features with them, but trying to get my girlfriend to use sage or myth was next to impossible.
Really depends on what you want to do with it. Trying to get Dolby or DTS on anything previous to Vista, is a pain in the butt. I have a creative card, and there stupid cards only do Dolby DTS via Analog and not digital, and on top of that, have to pay $5 for the Dolby DTS rights via the card. Even then I could not get my receiver to recognize anything besides PCM Audio, installed Windows 7, immediately got dolby and DTS working. No idea on Linux and what its capabilites are for HTPC's.
I do want to give an HTPC another try with a spare 7 install I have.
I love the idea behind an HTPC and had one for a while, using it for Blu-ray, and well I download for the most part any TV I watch as I work when most of my shows are on. Blu-ray's for PC, come with non-full versions of WinDVD or PowerDVD, which only does Stereo Audio. You have to buy the full license to be able to do DTS or Dolby digital, just tha is $50 on top of the blu-ray player and at that point can get a stand alone of the same cost.
VLC is working on getting blu-ray working, but until that is done, to be able to get 5.1/7.1 via PC Blu-Ray, its just cheaper to get a stand alone blu-ray player.
Sage and mythTV really both work quite well as HTPC interfaces, I prefer Sage as there is a big user base seems to be, and worked a little better for me. Sage is a darn good DVR program. I would also recommend an ATI Video card, one of the 5XXX series, as they do audio/video over HDMI and can pass dolby/dts via HDMI, unlik most other sound cards.
Since then, I have just switched to using my PS3 or Xbox with Tversity and JamCast albeit I really cant use my PC if I am streaming something via Tversity, but it works and works quite well. For a 1 hour long show (41 minute) usually 10 minutes of buffering is all it takes and i have no stuttering or anything at all. Upscaling in TVersity works pretty darn well, but going from 720p to 1080p, almost doubles my buffer and severly pegs my system (i7 920 at 3.6ghz, 6gb ram, 1tb WD Black all my tv shows on, TVersity runs off my SSD), and pegs me at about 85% cpu usage. 720p, about 60% which is pretty much everything i have. Tversity just encodes on the fly.
One of the better sites I can recommend for HTPC questions/answers is avsforum, that was where I got my star in the forrary before I gave up
http://www.avsforum.com/avs-vb/forumdis ... forumid=26
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