If all you were doing was watching Blu-Rays, then I'd definitely recommend the I3 processor. But since you're wanting to rip/encode them on this system as well, I'd have to recommend going with a strong quad-core (if not six-core) system.
Do you have another strong system that could perform the ripping/encoding duties while this new one acts only as a media player?
In that case, I'd probably opt for an Intel CoreI5-750 processor. What motherboard I'd recommend would depend on your case (does it accept ATX form-factor boards or just Micro-ATX?), what other internal cards you need installed (is the ATI TV Tuner internal?), and what interface they require (if the tuner card is internal, what slot can it be installed in, PCI or PCI-Ex1/x16?).
A CoreI5 system will probably put you around $450 (including 2x2GB of DDR1333 RAM and an AMD HD5670 graphics card). You could probably save between $50 and $100 by going with an AMD Quad-Core system, but again, I'd have trouble recommending a motherboard.