Why the fsck would you want hardware MPEG2 encoding? The last time I checked, the great thing about a media center PC is you can slap in a Raptor, locate your files elsewhere on the network on a shiny huge-ass 250 GB drive, and encode everything directly for MPEG4. Burn them as data to DVD, and whammo, massive fscking amounts of movies on a single disc. All you need the hard drive in the HTPC to do is run the proggies, have some Vmem, and occasionally handle timeshifting.
The only time you'd EVER need to encode MPEG2 is if you're burning a DVD for a lame-ass technologically-impaired friend who's too low-tech to put together, or even utilize, an HTPC, at which point, you can do that in the background with TMPEGEnc and take the quality time to make fun of his ass.
Fsck MPEG2 hardware encoding. Get a good cheap TV Tuner that's open enough to support your BeyondTV's and MyHTPC's, a cheap videcard with decent video output (or higher end if you game), an Athlon XP-M with a nice copperheatsink and low-pro 80mm zalman fan, a Raptor for fast load times on every proggie you run, and an audio card with optical output to your reciever (AV-710, and you DO have a reciever, right?)
And don't tell me you need a gig for an HTPC. Unless you're doing gaming or encoding video 24/7, you'll rarely touch 512.
Let's total this up:
Antec Aria case ($118 shipped on newegg)
Athlon XP-M ($70 to $200 depending on speed)
MicroATX mobo (I recommend the MSI KM400A board, model number escapes me, $67 shipped on Mwave. SATA, 4 Mobo USB headers, GREAT layout for the Aria, and official support up to 3000+)
Hard drive for programs and windows (20 to 40 gigs, the faster the better - $40 to $120 depending)
RAM (A stick of PC3200 Geil will run you $95 shipped, and it'll do 2-3-2-6 at PC2700 speeds)
Audio (AV-710, $23 shipped)
Video (Radeon 9600, decent gaming, great output, $110)
TV Tuner (take your pick of the $50 to $70 pricerange)
Optical Drive (NEC 2510A - $90 shipped)
Heatsink (SLK-800A, $20, Zalman 80x15mm fan, $10)
BYOA network access
Grand total using the minimum specs - $693. And that's assuming you buy it all new, and bring no components of your own to the table. It'll be cool, silent, and damn fast for just about anything.
Seriously though - Don't host the files on the HTPC. Your primary PC is much better suited for serving up and storing large volumes of files effectively, and a 100 Mbps wired network (or 11g) is more than suitable for streaming 10 Megabit per second DVD-quality video, let alone 4 Mbps Xvid stuffs.