Playing BR/HD discs does not require a particularly massive system, I'm able to smoothly play back Blu-Ray discs via Arcsoft Total Theater (which integrates better with Vista MCE than PowerDVD and, in my opinion, produces a much better looking picture) on the following rig:
Intel C2D e4300 @ 1.8 ghz
2 gigs (1 gig x 2) HP PC 5300 DDR 2 memory
Gigabyte p965-DS3 2.0 mainboard
onboard Realtek ALC888 audio output via coax (passes DTS + DD fine from the MCE player and Arcsoft)
ATI x2600XT passively cooled video card w/ 256 megs GDDR3
160 + 500 gig 7.2k SATA drives (system + storage)
Antec 380 watt Earthwatts 80Plus PSU
Hauppauge 1600 PCI ATSC/QAM dual video tuner + MPG2 video encoder
Vista MCE + Nvidia PureVideo decoder (video only, audio codec is Microsoft) + MyMovies + Arcsoft Total Theatre
... the key is the video card of course since it's offloading most of the video decode work from the CPU. I've tried the ATI and Nvidia offerings in my HTPC and preferred ATI but YMMV of course.