I do have some unused PCS but parents dont want to see a box in the space with the brand new tv. I've been feeling that that is the best way to go. No need to worry about supporting formats or lack of power to handle the video. And if i attach a wifi adapter, i could access stuff from a NAS (once i make it), right?
Yes, BUT depending on bitrate and distance between your router and wifi adapter, wireless may not (will not) have sufficient bandwidth. Take .11g wireless. Supposedly 54Mbps. You lose half to overhead (now down to 27Mbps), but that's still optimistic. I'm lucky to see 10-11 Mbps 10ft from my wireless AP through 1 wall. That's not sufficient for any of my HD material.
If you can, pull ethernet cable. Even 100Mb "fast" ethernet over regular cat5 will do. This may get unsightly, which your folks may not like.
The pc in particular that im thinking of has Core2Duo E6420 cpu and i have a few gpus, Nvidia 8600gt, 8800gt, 6800gt. All can handle 1080P resolution so does it matter which one i use?
That CPU is plenty. Use the 8600GT. Yes, all can handle 1080p resolution, but not all have the same built-in decoding abilities. The 8600 and 8800 cores feature 2nd gen PureVideo HD decoding:http://en.wikipedia.org/wiki/Nvidia_Pur ... reVideo_HD
VC-1 decoding is not fully accelerated. In practice, this shouldn't matter with your Core 2 Duo.