Netflix is working fine on my HTPC with an OK picture and 5.1 sound, (the movie North Face). I think the HTPC is a little better platform than on my PS3. I am using Windows 7 Media Center, Internet Explorer, Silverlight, a D-Link DIR-655 router, GIGABYTE GA-EP45-UD3P P45 775 R mother board, HIS H467QSS1GP HD4670 1GB graphics card, CPU INTEL|C2D E7400 2.8G 775, 2GX2|A-DATA ADQVE1B16K memory, HD 640G|WD 7K 16M WD6400AAKS hard drive, DSL Lite Internet, ATI catalyst 10.7
For reference quality blu-ray where I want 1080p picture quality and top of the line audio I would stick with a blu-ray disk. Otherwise, Netflix "watch now" does the trick for me.