|Here's what I'd recommend:|
Intel Core i5 750 ($199.99) or AMD Phenom II X4 965 (185.99)
Both are quad-core processors. The i5 750 is a little faster than the Phenom 965, but motherboards for the Phenom are cheaper. Both are very fast x264 video encoders and gamers.
If you choose the Core i5, you'll want a P55-based board like this Asus:
Or, if you choose the Phenom II X4:
Both of these boards have USB 3.0 and 6Gb/s SATA, so they're ready to rock and roll with the 6Gb/s hard drive I've listed below. They're also CrossFire ready, which means that you can add a second video card in the future.
Gigabyte Radeon HD 5850 ($309.99):
OR Radeon HD 5770 ($139.99):
The 5850 is a very fast DX11 gaming card that uses far less power than nVidia's latest DX11 offerings. The 5770 is quite a bit slower, but it's also $170 less. The 5770 is still fast enough to be considered a gaming video card. And since you're interested in HD video, both cards have H.264/VC1 video decoders, integrated HDMI audio engines, and protected HDMI audio paths. The protected audio path lets you bitstream Dolby TrueHD and DTS-HD Master tracks from Blu-ray discs to a home theater receiver.
ATI also makes a Radeon 5830, but it isn't much faster than the 5770, despite being $100 more.
4GB (2 x 2GB) of DDR3-1600 memory ($109.99):
4 gigs of scary-fast DDR3 will still run 98% of the software that's out there very well.
1.0TB Western Digital Caviar Black hard drive ($109.99):
You might as well have tons of storage for all that high-def video. This drive has a 64MB cache and 6Gb/s SATA interface; it's a fast one.
LG's Blu-Ray reading, DVD burning optical drive ($99.99):
What's an HD video box without a Blu-Ray drive? This drive also reads and writes CDs and DVDs.
Antec Case and Power Supply bundle (114.99):
This case also comes with an Antec 500w "EarthWatts" power supply that will easily run the components mentioned above.
Windows 7 Home Premium x64 OEM ($99.99):
It's a well known fact that Windows 7 kicks major patootie. The OEM disk is the cheapest (legal) way to get Win7.
Total (Radeon 5850; Intel CPU/board): $1199.92
Total (Radeon 5850; AMD CPU/board): $1140.92
Total (Radeon 5770; Intel CPU/board): $1029.92
Total (Radeon 5770; AMD CPU/board): $970.92
BTW, yes, I have a life. Barely. :-)
HTPC | Pentium M @ 2.82GHz | 4GB | 1.0TB | Radeon HD5750 | Blu-Ray | Win7 Pro | HDMI out to Onkyo TX-SR707