Building a Media Center PC (HTPC)

Hi there

I have been reading this article/thread, and just wanted some clarification on a few things.

I am looking to build an HD Media-Center PC, with a low to medium budget.
I have purchased a top of the range 32" Sony Widescreen LCD, and rather than getting an upscaling DVD Player / Recorder, I have decided to build myself a HTPC

Just wondering two main things:
1. From reading around here, Windows Vista is going to be better than XP SP2 or MCE 2005 - for video playback with the new HD graphics cards?
2. It looks to me (from reading that link) like ATI are better for non-gaming purposes, such as HD video playback?

I am assuming that if a graphics card can play back the video and the system has enough resources, then getting the next model up is unnecessary, as long as the graphics cards all have the same AVIVO HD / PureVideo HD specs?

And finally, with the above in mind: What is the cheapest graphics card option to go for, which will be able to play DVD/DivX/Xvid and also the HD formats at full screen resolution?

Thanks for reading, looking forward to hearing back from you,
Panda