You can do it easily for $400, or you can spend $800.
$400 would be AMD motherboard with 6150 geforce video built in ($70), Athlon II x2 240 ($50), 4gb DDR2 memory (2x2gb - $85), Blu-Ray drive ($60to$80), spinpoint 500gb harddrive ($50), and any case&400watt power supply combo you can find in the $60-$70 range
Or you could go the route we did and redeploy something else. We upgraded a computer and took the 'old' CPU/mobo/RAM for the HTPC. Then bought a $30 HTPC cooler master elite 360 case, a 530-watt rosewill green series power supply $50, a $70 HD 4670 graphics card, and a $50 blu-ray drive.
The CPU is a 4200+ dual core with 3 gigs of DDR2 RAM.
It's running at 720p, and can play several games like batman arkham asylum maxed. (Stuff you'd play with a controller is generally what runs fine and is run)
But for just playing blu-ray, you could even use an old single core computer as long as you have a graphics card and the software to do the decoding mainly on the GPU.