System wise I definitely advise that you go with a mini-atx motherboard. You'll save tons of money that way and to be honest you shouldn't have any problems so long as you build in some decent air vents.
For the motherboard I would suggest a an AMD 780G motherboard. Yes Intel is much more powerful but you have to spend more, and you really don't need all that much proccessing power. Plus the integrated graphics on the 780G are absolutely superb for
HD video decoding and can even manage a decent bit of gaming. You can pick one up for right around $100 like
this one. Pair it with a
65nm X2 and 1GB of
RAM and you've got quite the nice system for under $200.
Processing power definitely won't be an issue but if you find any stuttering with your
HD video check out CoreAVC. It will allow you to playback
HD video on even the slowest of computers.
In terms of a hard drive you definetly want a desktop hard drive. Notebook hard drives are way more expensive, slower, and offer less capacity. The current favorite for HTPC hard drives are the Western Digital Green Power drives as they change the rotation speed depending on the application. This in turn means super quiet drives, less power, and very slightly degraded performance.
Looks like it'll be an interesting little mod. Enjoy it and hope that helps
