Yeah, Win 7 and it's media center are the easiest to setup and use, and look great whilst being perfectly functional for most needs.
Look for:
AMD low power CPU (try get AM3 if possible in price range, AM2/AM2+ has bandwidth issues with graphics I've found)
785G chipset motherboard
1TB WD green HDD (quiet, low power, large space for TV, movies etc)
2GB+ of whatever RAM you like as long as it works with the motherboard
Mobo will have integrated gfx, usually good enough for anything but games. If you must have external gfx, Radeon HD4350.
Case/PSU up to you. I've got an Antec Fusion Micro, it's ace.
Blu-ray drive optional. May also need software, e.g. powerdvd.
Get a microsoft MCE remote if poss, one of the best for HTPCs, OR get a logitech harmony for all your kit. Depending on the case, you may need to buy an IR reciever with the harmony. My case (above) has an inbuilt one.
Should be set, not sure what that comes to in total, if I had time I'd spec you up properly.