anyone use Dell Studio Hybrid or mini Mac for HTPC?

I'm seriously considering cutting the cable altogether. I currently have Time Warner digital cable with HD DVR, and I typically get Netflix as well... but just decided have been spending too much so I put my netflix on hold for a month. Now I'm thinking about just watching most of the programs I watch online, cutting the cable bill and going back to netflix and instant movies.

If I went this route I wouldn't need lots of power, but would be looking for something small, cheap and capable of outputting high quality audio and video.

The alternative would be to build my own. I'd probably get a 'HTPC' case, which tend to cost $100+ for a good one and wouldn't leave a whole lot for good components.

I would use it to 'stream' lossless audio to my stereo.
I would watch TV and movies from it
I may play a game or two, but that seems unlikely. If anything I might run a server from it so gfx power really isn't too necessary.
I may display photos, basically it would be used solely for media.

Requirements:
Digital audio out
HDMI out (DVI would be acceptable, but not preferred
Capable of handling HD output, current TV is only 720P, but will probably upgrade in the next year to 1080P.
quiet
small form factor that looks good in a living room.
Blue-Ray is not necessary, but would be nice as I already have a Blue-Ray player and will probably pick up the new Oppoo when it comes out.

So back to the original question, would a Dell Studio Hybrid or Mac Mini be a good solution for this? I mean I know I could get them both to work without spending too much, Mac would likely cost more though... Or should I just go from scratch?

thanks for the suggestions, very helpful as I honestly haven't looked at computer hardware since I built my current rig and then never at mobos with integrated graphics.

Just a couple notes, I'd be wary about suggesting that case/psu combo. I've used a couple cases by apevia and they were POS's and their PSU's are just as bad.

I'll have to read up about what integrated graphics solution I want. I could go with either Intel or AMD, so the choices are open.

For sound, I may put my Prelude in there and run USB out of my desktop since I have a very capable USB DAC, but it won't work the greatest in the living room since it's only stereo. But if I have to integrated digital out will work in a pinch.

no, I read up a bit more since posting and I think in its current state the Dell Studio Hybrid isn't powerful enough for what I'm looking for. It can play BD, but apparently struggles to handle resolutions above 720P smoothly. Right now my TV is only 720P, so while not a huge deal... I do plan on upgrading to a larger display within the next year and I likely will get a 1080P display and would want something that could handle those resolutions.

the new mac mini could handle those resolutions, but does not have the option of a BD drive. What good is the capability of high-def w/o HD source material? The previous gen was no better than the current Dell.

This leaves with two options.
1. going with a small form factor that doesn't have HD capability
2. waiting for Dell to update their studio hybrid, hopefully with the Nvidia 9400M chipset
or
3. build my own (yes, I know 3 options...)

So, realistically I think building would be the better option. It all just depends on what I want to do and what budget I have. There is a good chance I will build something in the next few months.

Main goals would be to have internet and audio steaming capability as I am seriously considering canning my cable bill. Just isn't worth it, and most of the shows I watch are available online. I would also like to be able to play my growing library of lossless music on my living room system easily.

I want a machine that is capable of playing a game like TF2 or CS:S just incase my main rig is down when we have a local lan party, or so that a friend could play.

I don't think I need a TV tuner card as I don't think I'll be able to get very many, if any at all OTA channels. I need to get a new digital tuner and a nice indoor antenna to find out as I live in an apartment and can't mount an antenna outside.

Really, blue-ray is not necessary at all, especially since I just got the new Oppo BDP-83 yesterday and it already has replaced both my Sharp BD player and Oppo 980 for SD DVD and SACD/CD.