2 different $1000 HTPC upgrade paths

Okay guys, I need personal options and perspectives/option which I may be forgetting...here's the dilemma:

I've set a budget of $1000 to upgrade my gaming rig (mainly FPS) to a gaming/HTPC. I'll present my current set-up and my two upgrade pathways and my rationales for each.

Current Set-Up:
E5200 (stock)
4GB DDR2800 OCZ Reaper (stock)
ATI 4830 512MB
150GB HD (almost full)
Creative Audigy 2ZS
Windows Vista Ultimate 32-bit
17" Viewsonic LCD

HDTV Option: (leaves me $50 under budget)
32" 1080p LCD HDTV (most likely an LG from buy.com)
AverMedia TV Tuner
LG Blu-Ray Player
WD Caviar Black 640GB

Bigger Monitor Option: (also leaves me $50 under budget)
Hanns G HG281 27.5" 1080p monitor
AVerMedia TV Tuner
LG Blu-Ray Player
WD Caviar Black 640GB
AMD Phenom II X4 940
GIGABYTE GA-MA790X-UD4P motherboard (crossfire capable)

My rationale for the first option is that a 32" HDTV is obviously larger and would be better for watching Blu-Rays while also being good for playing games.

My rationale for the second option is that getting the monitor that is 5" smaller saves me about $300 which can be used to upgrade the guts of my computer as I have been wanting to upgrade my processor for awhile now. Additionally, the move to the AM2,AM2+,AM3 platform will allow me to upgrade in the next year, while staying with my current motherboard (LGA 775) is will most likely be a dying breed with the Core i7 processors.

Another unexamined options is to buy a faster video card since I will be running games and movies at higher resolutions regardless of the option since I'm only running an ATI4830.

Let me know what you guys think, I'm not so concerned with brands as I am the upgrade strategy and what should be taken over other options.

Thanks

I would too go for the 2nd option. THe E5200 is a great chip and will be sufficient for HTPC uses.