Just starting - what's best?

Not sure of this forum’s protocol, so please excuse any faux pas.

57" Hitachi HDTV 1080
Xbox 360
Dell XPS 420 4GB RAM, 1.2 TB HD storage
Onkyo home theater HDMI
3 x DirecTV HR21-700 (networked MRV)
Windows 7
Belkin N+ Router
Belkin AV Powerline (Yes they pass thru enough for HD)
Been a MS Tech Beta tester since Win
New to ripping.
No Blue-ray … yet, but I’m sure I will, probably Onkyo
DVD collection = 273

I’ve tried ripping (copying 1:1) to hard drive. Media Center on BOX doesn’t “see” rips. - research acknowledges issue. Media Share on DirecTV box doesn’t play well either. Tried MP4’s. Haven’t tried WMV’s yet.
With my current setup, it’s looking like I should copy actual DVDs onto DVD media.
Ultimately, I’d like to store DVD’s on Hard Drives and be able to index, sort, and play (including menu & chapter skips) - directly to TV without having to burn DVD media.
What format is best? Should I get a Media Player and forego trying to use the Xbox as a media extender? If I get a Media player - I think I’d get one with expandable storage and just Ethernet the rips to it, then HDMI back to the A/V receiver. In that scenario, is there a preferred format? Who makes the best? Is there software that manages the videos?

How would you design a system from scratch?

Thanks in advance!