Hi!
^_^
You'll think I'm mad but I'd built some months ago an HTPC to watch & record SD TV, watch some SD/HD ripped videos and MP3/MP4 audio, based on Windows 7 Media Center. The hardware configuration? Let's see...
Motherboard: nVIDIA KT400 (VIA KT400 chipset)
Processor: AMD Athlon XP 2000+ (1,66 GB.)
RAM: 2x256 MB. DDR-266
GPU: nVIDIA GeForce 6200 with 256 MB. of VRAM (helps a lot with EVR

)
HDD: Western Digtal, 40 GB., E-IDE, 5400 RPM
Optic drives: 1 DVD-RW generic
PSU: Some-unrecognizable-brand-name 350W
Other devices: Some-other-unrecognizable-brand-name USB remote control won @ $5 in some eBay's auction
Anyway... I can watch TV, record TV, play DVD videos, DivX/XviD movies and some low-profile x264. Of course, can also play MP3 & MP4/AAC audio.

Obviously, I'd spent hours and hours and hours... tuning & tkeaking Windows 7 to get all that working fast but, you can get your old PC working really fast as result. Not as fast as a brand new PC, but close enough to get some guys like me satisfied.
Spanky, if you're running Windows Vista like your profile says, then you can install Windows 7 without problems too and probably your system will run smoothly than using Vista. Windows will install all the drivers automatically. If you miss some driver, you can try some driver that works with Vista.