UPDATED - MAY 5, 2010: Building a media centre PC is a compromise. You want it reasonably fast, to keep up with high definition content, but you also want it to be small and quiet.

The actual Media Centre PC system on our test bench. The case we use for our Labs builds is an Antec Skeleton, which is convenient for frequent build changes and upgrades. The actual case recommended for this budget system is listed below.
Core System
CPU: Intel Core i3 540 (Boxed) - $180

The Core i3 is pretty much the perfect CPU for a media centre. It runs cool enough to go with a low profile fan, while the integrated Intel HD graphics has enough power to chug through HD content without breaking a sweat.
Cooler: Intel stock cooler - $0

This cooler isn’t the fanciest about, but considering it comes free with the CPU, you can’t beat the price. It’s also quite low profile and almost silent.
Motherboard: Gigabyte H55M-USB3 - $199
This motherboard is perfectly suited to a media centre role. With DVI, HDMI and Displayport connections from the CPU integrated graphics, 7.1 audio and support for Dolby Home Theatre as well as new SATA 6G and USB3.0 ports, it’s got everything you could want under the TV.
Memory: Kingston 1333MHz ValuRAM 2GB - $79

We don’t really need more than 2GB for an HTPC, even with HD content. Feel free to up it to 4GB if your budget allows. In this case, the Kingston ValuRAM is of good quality and relatively inexpensive.
HDD: Western Digital Caviar Green 1TB (WD10EARS) - $115

This enviro-friendly drive isn’t just for the greenies. As it runs a bit slower than your average 7200RPM screamer it's also quieter and cooler, two things we want to see in a lounge room HTPC.
Optical Drive: Pioneer BDC-202BK Blu Ray Drive - $199

With the new Dolby TruHD and DTS-HD bitstreaming support in the Core i3 and H55 combo, audio from Blu-ray will really sing. If your AV receiver can decode TruHD, then you’re going to get the best possible sound.
PSU: Antec 380D Green EarthWatts PSU - $85
This quiet, high efficiency power supply has more than enough power for this power sipping system. A big quiet 80mm fan means it won’t be too noisy for the lounge room.
Chassis: Antec Fusion Remote - $259

With a case mounted LCD display and the remote control already in the box, the Antec Fusion Remote offers excellent value when putting together a new HTPC. This case has cooling nous to keep your components on the chilly side, while not driving up volume levels.
AverTV TwinStar PCI-E - $159
With excellent HDTV decoding, twin tuners for simultaneous watching and recording plus excellent software and stable drivers it’s very, very hard to pass up.
Core system price: $1215
PC Mark Vantage: 5873
EXTRAS
For consistency in our testing, APC has chosen BenQ as our preferred partner for monitors in Live Builds, since it's the only supplier able to provide us with a monitor for virtually every different type of PC build. We also believe BenQ monitors deliver a great mix of performance and value.
Monitor: BenQ M2700HD 27" CCFL - $799
A monitor that's ideal for a Media Centre PC. It has a true 27in picture for multitasking, video, games and second TV. With13 port, it's a digital hub as much as a screen. Built into BenQ monitors is the Senseye IPU (Image Processing Unit). Featuring advanced image enhancement technology, it optimizes contrast and sharpness, giving ultimate clarity and depth. Senseye separates color signals and adjusts each one individually, thus avoiding distortion and delivering an all-round richer experience.