Just get a hand-me down freebee computer, or a $100 or $200 computer on craigslist, toss in a nice mpeg2/4 capture card, and a fanless video card.
I mean think about it, if you get a 1/2 modern video card, it has onboard hardware video decompression for mpeg2, mpeg 4, even h264 (HD) and all but the cheapest capture cards have onboard mpeg2 compression AT LEAST (the one i mentioned earlier at tigeridirect is like $139, and has onboard mpeg4 compression and DUAL TUNERS!
So the cpu really does nothing but control the hard drive. You could make even an old PII work just fine for a HTPC.
You could put something together for $200 or $300 max.
There's all kinds of HTPC programs. For windows alone there's Windows media center, mediaportal, tvedia, firefly, pinnacle media center, and a few others.
and there's even more free ones for linux.
a remote is $30 at tigerdirect (i had no luck finding them at newegg in the past) And when i was at compusa earlier today, they were BLOWING out 500GB maxtors for $79 out the door.