It is safe to say that hddvd/bluray are the best possible source and while a good hdtv source (which is by no means to be expected) can come close, the level of detail is just not there. This is partly due to the simple fact that most tv stations are limited to smaller bandwidths than would be adviseable.
one of the things that've been bugging me recently is the difference between 720p and 1080p. someone mentioned to me before that a good 720p encode is better than a poor 1080p encode. is that true? i mean would a 6gb 720p encode be possibly better than an 8gb 1080p encode? since we're talking about quality anyway, do you prefer to download 720p for the size or 1080p?
It highly depends on your equipment, is your tv only hd-ready or fully capable for hd? Full HD means 1920x1080 and while I'm not trying to start a philosophical discussion here, this resolution is only worth it with the proper tv appliance. Those "small" 37" full HD products may be nice but the true advantage of the higher quality and resolution can only be shown with larger screens, from 47" upwards in my opinion. Those aren't cheap however and you'll have to think about parting with $2000 for one of those.
To make a long explanation short: if you don't have the proper hardware to support this resolution, then you won't NEED the 1080 rips. I know a couple of friends who own some smaller screens and they have no complaints about a little bit of upconverting.
The issue between 720p and 1080 is about the promise for the future. The trend is clearly leading to full HD screens but those are still too expensive for the average consumer - and the BluRay/HDDVD war doesn't help to invest in new technology either. While 1080 rips are larger in size (up to 2-3x larger than their 720p equivalent) and will demand more CPU time to decode, they come with a guarantee for the future whenever that may be
edit: btw regarding that lotr encode i heard it's not the extended version. i'm not so keen on it yet since i recently downloaded the 88gb dvd extended lol.
88gb? :O The Two Towers Extended Edt aired in HDTV, the other two are only available with upconverted parts cut in. That is obviously less than perfect but I still prefer 3/4 of a movie to be hd than not at all! For anyone who wants the extended editions in a reasonable size, I'd suggest the XTSF release (Lord.Of.The.Rings.Trilogy.Extended.Edition.DVDRip.x264-XTSF) who have done a nice x264 dvdrip in 13gb for all 3 movies - those are also way better than any xvid dvdrip I've ever seen.
i'll try to find out more information on that by reading up elsewhere first cus i dont' wanna bore you with explaining that whole system from scratch. but i'd like to know though, how much would it cost to set up one? let's say i'm using a 500gb conventional harddisk.
A HTPC is technically like any other personal computer but (ideally) with some optimizations in noise reduction and with a couple of limitations. That means you won't get one of those for a bargain prize and it'll likely cost you several hundred Euros/dollars. The by far better bargain are external tools like the Media Tank I linked to earlier. I prefer (and recommend) a HTPC because it's been working amazingly well for me, my whole music collection is controlled through my media station, I have a digital tv receiver, I can record tv programs on it, I can watch everything from DVD to BluRay with it and I store content on harddrives that can be exchanged in a matter of 20 seconds. So you see that there are some real strengths to this solution but if you do not or cannot use them, a HTPC will likely be an over-expensive gadget to you.