I'm not sure what the video standards are down under, but do not connect your HTPC to your HD-ready TV using S-video! RGB is the preferred method on this side of the planet, using a male VGA to male VGA cable or a VGA to 5 BNC cable, depending on the connectors on the TV.
If you go with a widescreen set, then for 4:3 content you either have to letterbox, cut off part of the picture, or distort the picture by stretching it horizontally. Side letterboxing runs the risk of 4:3 burn in. Cutting off the top and bottom of the picture is what a lot of folks do, but you could cut off sports scores in the process. I could be wrong, but I don't think there is a nonlinear horizontal stretch yet for PC's, but you can do a linear one, so that Ally McBeal will look like Roseanne. dScaler, YXY, Powerstrip, your DVD player program, DVD Genie, and your TV all give you some bits of control over the aspect ratio. There is no problem using a HTPC with widescreen sets.
The other option you can consider is a 4:3 set with a selectable 16:9 squeeze. It squeezes down its raster vertically and becomes a widescreen set whenever you want, just with wide letterbox bars. This is what I have, and so my 4:3 480i NTSC TV is upscaled to full screen 1800x1200i, with no need to distort or to risk 4:3 burn in. There is some risk of widescreen burn-in, but since there are so many different widescreen aspect ratios, the chance that a sharply defined burn line will develop is reduced.
The ATI Radeon LE does a really nice job of scaling to high resolutions, and it's cheap, $80 USD. Also, ATI Player in conjunction with an ATI card does a great job of DVD playback and with minimal horsepower required from your PC, since it uses hardware DVD acceleration on the card. Other cards can do a nice job too, especially if you stick to an even resolution like 2X the DVD resolution (i.e., 1440x960i, at least for us region 1 folk.)
Anyway, the right choice of a monitor for your HTPC can make all the difference, so take your time and do your research. Look into CRT front projectors too. You may find that a cost effective way to go widescreen at this time in Australia, and they are a perfect match for HTPC's.
<FONT size="1">Philips 60PP9601, join the Philips_HDTV discussion group
DirecTV, Hughes Platinum & Gold receivers
Sony SVR-2000 TiVo upgraded to 128 hours basic quality
HTPC: Duron 750, K7 Master, Radeon LE w/TV-out, Cybermail, Toshiba M1201B 5X DVD, IRMan
Kenwood VR-407 receiver & subwoofer (blush)
nOrh 4.0 marble center speaker, 4 more soon</FONT s>