Blu Ray in your pc will give you 1080p if you have the right video card.
My ATI 4830 will do 1080P -it has DVI and HDMI ports on it
Motherboards with the HDMI video built into them will carry video and audio over HDMI. If you add a video card to an existing machine to do it go with ATI, they have integrated video and audio into one card with the easiest installation. Either way, they will both compress your audio. There is an audio card that will tie you video and audio together into one HDMI feed with no loss in audio, but it's like $300.
I won't be spending that much on the whole deal much less one audio card. I am not an audio or video connossiuer ---expert
My wife says I am deaf 
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I am looking to put bluray on a hard drive and play it on a 1080P TV. I do not want to burn BR DVDs if I can get away with it--too costly. I will buy a BR drive if needed to get the rented media on it's way to the hard drive.
If you use a HTPC there is no need for WDTV. I just sold a WDTV that I won from Newegg because I already have a HTPC.
Best quality? Blu Ray player. Check this one out:
http://www.bestbuy.com/site/Samsung+...&skuId=9776512
It will stream Netflix, Blockbuster on demand etc. In order to use it wireless you will have to buy an adapter that is like $70.
You could just do a Blu Ray player and then put the WDTV or MediaGate on a different input. You could then plug it into the computer to put movies on it and just move it to the TV to view them. But if you plan to rip your own Blu Ray disk to the WDTV/MediaGate then yeah, you will need a Blu Ray drive in your pc. And the software to get past the copy block is like $100 on it's own.
I'm ok with the $100 for the software
A lot of Blu Rays now come with a digital download if you want a digital copy.
Ripping Blu Ray disk is not easy, there is no "just click here" backup software for them like they have for DVD.
I presently have ANY DVD and it will rip to a harddrive very easily. I assume the HD version will do that as well--one click
Your best bet is to just buy a good Blu Ray player and get an account with Netflix. Then you can rent what you on Blu Ray when you want it and you can watch some stuff via streaming with the Blu Ray player.
Just be warned, if you like to get new movies when they come out Netflix may make you mad. They just signed a deal with three major studios agreeing that they will not rent new release movies for 28 days after their release. So you will be able to find the newest release at Blockbuster or Best Buy, but you will not be able to get it from Netflix for another 28 days.