I just read an article in the newspaper here (forget if it was Business or whatever) about how MCE is taking off w/ retailers, interestingly All of Gateway's desktop line uses it and some of their eMachines too, and apparently Dell's new (as in now current models) line of XPS desktops do too, from that article. It mentioned that there are MCE PCs available for under $600 (didn't say where or how stripped down it is) and that the average has gone down from ~$1200 to ~$700 (forgot exact figures).
So yeah, its not so bad now.
Granted, it would still mean buying a freaking prebuilt system, unless they relaxed that too.. haven't paid much attention until now. I know they relaxed the HW requirements for bundling remotes and TV tuners etc (from that article) to help get the systems moving ..
Also, apparently the x360 can talk to normal XP machines w/ Windows Media Connect installed, or at least a few places have mentioned it.. I acquired a copy of the latest version of it from my p2p client of choice (since it's a windows genuine wtf it is thing, can't DL it online.. don't ask why, if you don't know lol).. installed it, of course I have no extenders to test it with, but it looks like it'll share mp3s, wavs (I think), avis, mpeg1/2 videos, wmv/wma stuff.. none of their docs I can find indicate required/supported codecs for avi, obviously wmv will be wmv, and mpeg is mpeg.
They made an Extender for the original xbox didn't they? Maybe I'll locate a copy of that to see how kludgey it is.. lol. I'm sure XBMC will still be > MCE tho since there'll be no xvid/divx/non-ms mpeg4/ogg/mkv/etc support, and I sure as hell ain't gonna start re-encoding everything..
Hrm, I did some poking around and the Media Connect interfaces are sort-of kind-of publicly available, it's based on UPnP (which makes my head hurt trying to read the specs) and they list their variation on the MediaRenderer and MediaServer (? forgot the source/server name) interfaces along with the HTTP type streaming it uses for data, of course they don't give you any wmv/wma decoding info but hey..
It would be nice if someone cooked up an open source (or otherwise free anyhow, beggers can't be choosers) Media Connect server that could on the fly re-encode to say, stupid high CBR or CQ mpeg2 or something (so minimal CPU load to do it) and just give a list of all your shared videos as if they were mpeg2's.. of course it'd have to do subtitle compositing and you'd need to have some sort of remote option for choosing them, hrm.. same could be done to audio for wavs.. just decode and stream! now you can keep your audio in ogg, flac, whatever.
I'd volunteer to try cooking the underlying network code (I hate UI stuff) but the UPnP stuff along gave me suicidal urges. I couldn't even find an overview of the spec describing the basis of it when I DL'd it, just all the interface descriptions and shit.. I'm sure its there someplace but not in the "full" documentation pkg I dl'd from the UPnP site.