I built a cheap-ish computer several years ago, installed XP and added a TV-card. I used the free DVR program GBPVR to record shows, watch video files etc. Lately, I haven’t been recording too many shows, opting to download them as torrents instead. I like XBMC’s interface and I’ve been using it exclusively for several months now.
To get a computer hooked up to your TV is easy as pie. You just need a Video/Graphics card with a S-Video out-port. Most new TV’s still have a S-video in-port, so a S-video wire will connect the two. If you’re looking for a higher-quality feed, you might want to look into graphics cards with Component out-ports. Connecting sound is similar; you probably have low-fidelity sound output ports on your computer that correspond to sound in-ports on your HDTV. There are also high-quality sound cards available. To complete your homemade DVR, you just need to get a IR remote kit so that you can navigate from your couch. It should be noted that doing it my way is a little harder, but you get to control what kind of processor you have, how much hard drive space, etc. AppleTV limits your options but is a complete solution that requires little work on your part.
As for getting shows, I recently discovered ShowRSS. You choose which shows you want to follow and the site creates a custom RSS feed for you. You load this feed into your bittorrent client of choice and it will automatically download your shows for you. Last night’s episode of Stargate: Universe starting downloading to my computer automatically within just a few hours of airing.
The easiest option for getting downloading shows onto your HDTV is to get a DIVX-compatible DVD player with a USB port. This is also the cheapest option of all, as a DIVX-compatible DVD player with USB port can be purchased for $40—$65, and a large enough USB drive can be purchased for $10—$15. Just download your show, move it to your USB drive, then plug your USB drive into the DVD player. You already have a remote and if your DVD player is hooked up to your TV correctly, there is nothing else to setup.