The first question is whether

[skirge01]

The first question is whether or not you want to hear your PC when watching TV.  How tolerable would you be of it?  If you don’t want to hear it, then I would recommend building a server and using small HTPCs or extenders at the TV.  While you certainly could build a quiet HTPC with lots of storage and still be quiet, it will take a decent amount of planning, effort, and money.  (Not that a server is going to wind up saving you money, mind you.)  Also, you stated that the Xbox would be an extender.  If memory serves, they’re quite loud, aren’t they?

It sounds like you’ve settled on Media Center already.  Have you explored any other options?

P.S.  On a personal note, thank you for your service to your country.