I found an interesting one-page article on how to build a Linux home media centre. I have yet to do this myself with an open source installation but it seems to be the right time to do it.
Tom Lynema chose to build a media centre connected via a wireless network with default security settings and most importantly output to television (S-Video and Composite).
Unfortunately, there are no screen captures or pictures to illustrate how he worked his way through the installation process and it would have been a good idea to have a tutorial on it. That said, he used Ubuntu, which is probably one of the easiest Linux distributions on the market.
I am currently planning to build something slightly similar using the Dell Optiplex GX110, a small form factor Pentium III computer, one which can be easily tucked away under my bed.
The beauty with small home media centres - Linux or Windows based - is that they need only one cable - the power cable. Using a wireless network card, you can control the computer remotely using tools like VNC.