If i may ask, how were you planning on getting the output to the different tv's etc? Using a couple of cheap PCS as front ends? direct cables from the server?
Decoding DVDs and HD content would be pretty intensive for an older PC like that and you probably couldn't do more then one thing at once while streaming HD content.
As for the xbox, as far as i'm concerned the Xbox with XBMC is THE best front end media player out there, sure it may have the occasional bug but it works fine with everything i throw at it and it looks fantastic on a TV.
I've tried all sorts of media centre solutions from front end PC's running Windows Media Centre, or Myth TV (Linux Based), to having a direct output straight from the server and the best solution is what i have setup right now. Ill clue you in on min, it might give you some ideas:
Server
P4 2.66
1G 333 Ram
2 x 200 G HDD
Running Suse 10 (files are on different samba shares)
The 2 xbox's i have running as front ends use a Netgear wireless gaming adapter for streaming. I also stream to another 2 rooms that are just running PC's that are just normal computers but hooked up to the TV's in the respective rooms.
The wireless runs it fine but if you can i would use a wired solution.
AMD Athlon64 3500+
1024MB 512x2 Dual Channel Corsair TwinX
Coolermaster Wavemaster
120GB Seagate SATA HDD
Gecube X800XT Platinum
Logitch 5.1 Surround
LG 16x Dual Layer DVD
Countle