The case isn't a big problem anymore. There are several cases in different sizes that look good enough to be positioned next to the TV, and I think there will be several more within a year.
DIGN (large, ATX mobo and PSU, alu, gold and black colors, many negative comments regarding quality, but many are happy with it when they have fixed it)
CoolerMaster ATC630 (micro-ATX mobo and I think ATX PSU, black and alu color)
Lian-Li PC9300 (micro-ATX mobo and PSU, alu color)
DPI Clio (micro-ATX mobo and PSU (or maybe flex PSU, doesn't say), alu and black colors, low profile but full size CD and one full size PSI)
Just to mention some of the alternatives
Picking the hardware and making it quiet is a job, but I think making the stuff work really nice together with a smooth easy-to-use interface and still keep a high level of functionality and flexibility is a much larger job.
And then there is the sound. When the PC include everything including FM and internet radio, it is a bit annoying that most receivers include a radio. You need something to power up some nice speakers, but you don't need many radios.