I'm a frequent lurker but not as frequent poster. I thought I'd share my recent mini setup which might help people who are on the fence.

Goals (admittedly simple)
Record and watch OTA HD (no need to record cable as we don't have it - I can't stand having that monthly bill)
Watch movies - mostly netflix and some backed up


History
I used to have a powermac G5 attached to a 32" lcd tv. The goal was to record and watch OTA HD with an eyetv 500 and, at the time, the only machine that would play HD. Before the G5 and eyetv 500, I'd record to a powerbook from a samsung T165 tuner with VirtualDVHS. We moved and I sold the whole setup so we wouldn't have to pay to have it shipped across the country.

Current Setup
Optoma HD70 Projector
Mac Mini Core Duo 1.66

The mac mini recognized the Optoma immediately and best of all, there's no overscan at all. I don't have a keyboard and mouse for the mini. I use VNC to control the mini if I have to but I have been pleasantly surprised about how little I have used VNC. Mostly, I can achieve what I want (short of shutting down) with a combo of the apple and eyetv remotes.

One thing I hadn't expected to like but do is the ability to order tv and movies from the apple store (which I have to do via VNC, unfortunately). I don't do it often but when I do I find it really handy. I do this mostly for kid's stuff. For example, they were really sick recently and it was nice to be able to order something on the spot and not have to leave the house.

I know that some will say that Apple's dvd player is not the best. That may be true, but it compares fine to my crappy stand alone player and the convenience factor trumps the last bit of image quality, for me.

I considered an appletv but the time to convert eyetv files to h.264 was too much for me to stomach. Instead, I got a refurb mini at a great price (which took some close monitoring of the apple store and a quick trigger) which will be more flexible but maybe less user friendly.

My basic setup takes little extra software and tweaking and is achievable for most (I think). One key is not having to mess with switchresx or diplayconfigx. I used switchres to get rid of the overscan when I had an lcd tv. And while it was not too difficult, it did take time. I have been very pleased with my results and this has been the best by far of the three mac htpc setups that I have had.

Yeah, most of us have strongly recommended the mini for some time, did you keep the 500 for OTA? If so, you may find that your 1.66 is just the slightest bit under-powered, whereas the 1.83 is glitch-free under the same load--action sequences, fast pans, etc.

I think a lot of people will like ordering from iTMS, whether they have a mini or aTV connected to their TV. It'll take 720p content for me to bite, but most won't care.

No one here currently watching and recording high def with their Macs will be transcoding it into an acceptable aTV/iTunes format just to get it to work with the aTV. The aTV mainly appeals to two groups: the high tech Luddites, those with deep experience but willing to regress for the sake of convenience and seamlessless and also to those with minimal actual home theater experience, i.e. never owned an HDTV, never had an upscaling dvd player, never hooked a Mac with digital out up to a TV, those whose definition of "home theater" is merely hooking their 5G iPods up to their TVs, etc.

Other people considering your projector will be glad to hear of your out of the box success--there's little doubt display hassles are the number one newbie hurdle.

I have kept the 500 for OTA. It's funny, I haven't had any frame skipping problems (that I've noticed) with the 1.66 mini and that's with the stock 512 MB of Ram. I expected to have to go to 1gb. Maybe because I run so few programs it is not a problem. Or, maybe I'm just not watching critically enough. Either way, I don't have a problem.

In fact, the mini's picture looks better than the G5 (dual 2.0 ghz with 128mb of video ram). Of course, I am comparing with different displays, but I used to notice some frame skipping and tearing with the G5.