For those interested in the HTPC route, I've been running
XBMC Media Center for a couple years, and it is truly excellent. The latest version is quite highly developed, and in my opinion smokes Apple TV and the like with its flexibility and customizability. The interface is also much nicer than the WDTV Live I tried.
XBMC is a good candidate for the Ion-based HTPCs as it makes use of the GPU acceleration for decoding HD content.
Like others here, I use no physical media aside from popping it in my server to rip to a storage array... everything is then streamed via network. If you take a bit of time to set up your library, then it can load up all the album/movie art, artist/actor/plot info.
If you have an older receiver that doesn't do DTS decoding, it can recode the DTS stream to AC3 so you'll still get the surround when watching new content.
One current limitation (when I last checked at least) is that it still cannot directly play back Bluray from a disc, as there is no open source Bluray decoding library. This is not an issue if you rip your content to hard drive.