Please comment if you have both a HTPC and a WDTV 2 (or WDTV)

Will the WDTV 2 (Live) or a HTPC have better picture quality (if not the same)?

For reference the HTPC would be something along the lines of:
ASUS M3N78-EM (Geforce 8300) +AMD 250
or
GIGABYTE GA-MA785GM-US2H (Radeon HD 4200) wATI HD+ AMD 250
or
ASUS P5Q-EM LGA775 Intel G45 chipset (X4500HD) + E5300


And how with either compare to the PS3 (which I have)

I have a friend with the original WDTV, and the picture quality was just fine. He didn't have the greatest setup as far as TV's go, but the WDTV outputs 1080p through HDMI. I think the biggest picture quality limitation here is the source quality of the videos you are watching. I have a PS3, and it works great with great picture quality, if you are streaming/playing localally stored content, but it doesn't support the most types of video files. That being said, if you have to transcode the video, your quality is going to suffer. Another couple of options for you to consider would be the Apple TV (great with Boxee), or a nettop with HDMI out, like this (http://www.engadget.com/2009/09/01/asus-eeebox-eb1012-teases-home-theaters-with-dual-core-atom-and/).

If you're willing to spend a little more money for nvidia card, it WILL make the difference. Purevideo gen 3 is really good IMO, just add some sharpening (edge enhancement) and noise reduction, and the SD videos will look much better. Hd videos look better as well.

I don't have any experience with ATI though.

sorry could you clarify whether it'll be better or worse than the wdtv picture quality? (particularily if Nvidea>WDTV>ATI)

new to this stuff but have the WDTV Live and for a little more than a hundred bucks amazed with the picture quality these little stand alone devices put out.

no experience with the cards mentioned.

sorry could you clarify whether it'll be better or worse than the wdtv picture quality? (particularily if Nvidea>WDTV>ATI)

Nvidia > WDTV

I don't know about ATI.

A big consideration for me though is the power usage and heat generated by a PC. I went with WDTV because of that. It's simple and probably cheaper.

But so far there are some older anime files that WDTV can't play. A PC can play EVERYTHING, so yeah it's got its advantages.

My experience is a bit dated (I last used an nvidia based HTPC in '06) but the PQ of the WDTV is IMO on par. Take into consideration the small footprint, low power consumption, and the fact that it "just works" and the WDTV has completely removed my lingering desire to build another HTPC.