Here is my 2 cents.
Media Center is an alright solution. It will play tv, record tv, play music, play videos, and play dvd's.
I gave it a couple shots, but didn't like it as well as Beyond TV.
I currently run Snapstream's Beyond TV and PowerDVD.
My HTPC consists of 3 HD tuners (ATI 650 Wonders), an ATI x1600 Pro agp card, DVDRom, ATI Remote wonder and a Dimaond MM 7.1 Audio card.
Beyond TV is great and extremely reliable for recording OTA (over the air) television and for playing downloaded divx/xvid files. It will also play MP3's.
I use power dvd to play dvd's and video_ts folders of ripped dvd's.
The remote wonder remote from ATI works great with beyond tv and power dvd. You can download a trial from Snapstream.
Unfortunately neither of those are free. I did however snag a copy of Beyond TV from Outpost for FAR (Free after rebate).
Let me be the first to tell you, getting the HTPC like you like it will take some tinkering, but once you get it how you like it, its great.
I would advise trying different trial versions to see what you like best.