I use my HTPC as my video switcher. DVDs (either played in the DVD drive or from my harddrive) via ZoomPlayer and satellite feed (via a capture card and DScaler (capture app)) are output from my video card, and piped directly to my projector. The secondary VGA out on my video card goes to a HTPC monitor, which lets me control the computer.
How's the sound coming from your computer sound card? I found it noisy. That was in 1985! 

Things have improved since 85!
I'm using a Creative Labs Audigy2 that has a decent s/n ratio (106db) and the ability to decode DVDA. There is no doubt its not an "audiophile" solution, but for me, the flexibility it offers is amazing.
http://www.soundblaster.com/products/audigy2/It passes 5.1 analog to the sp1.7 and it sounds stunning. The digital SPDIF output passes DD and DTS to the bryston for decoding. For what its worth, it was the first soundcard to achieve a THX certification in Aug 2003.
A buddy of mine has compared the Audigy2 against a Denon 1200 (for DVDA) and found the Audigy2 did extremely well in comparision. I'm *SURE* this is making the audiophiles cringe..
Certainly not a solution for everyone - but there is a very low noise floor and a distinct lack of hiss. Since the default drivers upsampled everything out the SPDIF to 48khz, i had to replace them with 3rd party drivers from kxproject.com which retain the original sample rate. (damn you, Creative labs!)
I've been looking to upgrade this component since I'm *SURE* there are better soundcards, but the price/performance of this one has proven tough to beat. I also have a Delta 410 soundcard installed which feeds the 3 other zones in the house besides the Home Theater.
To complete the geek setup, I use a Pocket PC to control things via a wireless network.
Anyone with ideas for high fidelity soundcards, please offer them up!