Yes hardware is definitely the easy part. Software is the much more difficult and time consuming part. The first one may be quite the learning curve adventure. However once you get the software install down once things become much easier the 2nd time round. Thank goodness that there's Arcsoft Total Media Theatre now. I was so sick of Cyberlink and Intervideo messes.
I suggest the following, however I suggest doing research into each piece to confirm if it's something that you want.
Except for the OS, everything listed below is free or has trial software to try out to see if you like it.
Vista Ultimate or Vista Home Premium. Unless you're a XP Media Center fan, I honestly prefer Vista Media Center at this point with Arcsoft Total Media Theatre.
www.hulu.com
MyMovies plugin
Arcsoft Total Media Theatre
Core Community Codec Pack
Slysoft AnyDVD HD
ImgBurn + Daemon Tools Lite
OR
Slysoft VirtualCD/DVD
Logitech DiNovo Mini
AND/OR
Microsoft Wireless Media Center Keyboard/Mouse 7000 or 8000 series.
http://www.thegreenbutton.com
http://missingremote.com
WebGuide for Windows Media Center (At your own risk as this is a Beta product, but if you can get it working properly and you have fast internet upload speeds, this can be amazing).
http://asciiexpress.com/webguide/