You can really do as little or as much as you want. If your computer can play video, it can play it to a tv. Thats assuming your video has the proper outputs, but if it doesn't many of the cheapest budget cards out there can do it (30$ easy) including much HD video (there are advantages to getting a little better than minimum video card if you want to play HD files though).
As far as sound, pretty much any audio (sound card or onboard) is going to have a 1/8" jack, which can easily be connected to a tv or stereo with an adapter or adapter cable for a few dollars.
Maximum would be perhaps a custom built entertainment center that is more computer friendly (some may wish to put networking equipment, or streaming equipment, or several external devices or even a storage server in it). I have seen htpc cases (not the computer, just the case) that run several hundred dollars. Of course the computer would be built from the ground up with htpc oriented components, which can get quite expensive if you go overboard. There are all kinds of toys you can add to an htpc. You might want a dedicated second computer for converting riped dvd's to h.264, in fact I'm betting someone smart enough could set it up where you could just rip, and it would automatically convert and load to your media server. You Might also want several optical drives to rip if you have a big collection to rip (I never really thought about doing that way, but if I get another hard drive, I might try it). Good remotes cost hundreds of dollars and either work with computers or can be made to work with computers. The sky is the limit.
Personally, I'm a pack rat, and never throw away computer parts. All my stuff is a mish mosh of new and old parts (I just buy as I need). I reuse and reuses anything and everything. I'm also a big case guy (no little mini htpc cases for me), and a cheap bastard (I'm using an antec 900 for my htpc but I got it for 60$).
What every you want to do, cheap or expensive, standard (less expensive parts) or really custom, high end or what ever, you can do it.
Here is my getto setup. Who says you cannot recycle computer parts.
Top, left to right is the kids computer, an internet phone server (I might get rid of that now that I have a gigibit router with qos), a corded optical mouse that is hooked to the kvm (the computers have their own wireless mice too), a zenith digital converter box, an rca 6 channel remote controllable a/v switch box (its analog but so is the tv right now and I got it for a steal), a 4 channel kvm switch, a 60$ radio shack antenna (got good reviews even over much more expensive ones, but I think mines got a short, and realized to late, there was a tiny sticker, that it was a return).
Second level, a cheap used 17" crt (sd tvs are not good enough for text plus it is a pain to look down), middle shelf is full of god knows what, mostly power distribution (including a nice wooden charging station for cel, mp3 etc. with hideaway cubbys for the chargers), a philips up converting dvd player and a magnavox vcr dvd recorder (just got those too, if you look close, they are not hooked up), and the top of the htpc). The router, modem, switch etc used to be there but were recently mounted on the left side.
Left side, modem (on top), and gigibit router and switch on the side.
Next level. An aiwa stereo (not top of the line, but a single unit 500$ device, nice for what it is). The pinnacle of my entertainment center, a 27" tube, refurbished SD tv, absolutely the best you can get!!!! It even has a vcr and dvd built in (both broken by the kids). It replaced my 27" pany tube (nice tv, quit working, started working sometimes and got moved to the bedroom). Next would be the htpc, with about 2TB storage, and count them, 8 hard drives, that right, 8 hard drives.... I told you I never throw anything away. Its an antec 900, 2600xt vid, abit motherboard, single core athlon (I have a conroe, but that abit MB just rocks too much to replace so the conroe is in the bedroom), 2GB ddr, antec pannel remote unit, sig card reader, haupage 1600, sound blaster xfi, lights, fans, and all kinds of other crap I cannot remember (I have more than I can remember packed in that case). 8 hard drives is ghetto though, as I could get 1 2TB or 2 1TB drives to replace 8 (the raids are nice but new drives are so fast, they have lost some advantage).
Next level, some cables and crap from incomplete reworking, the bottom of the tv covered with cardboard (the dvd and vcr are dead but the kids were causing the tv to freak out and shut down, so they had to be blocked). another cubby with disk books (probably 1000 disks), among maybe 5000, the pain of being a pack rat, I have disks everywhere, everywhere, everywhere, everywhere, I scream at night because I have nightmares about the apartment falling in on me because of the disks, disks everywhere, I probably have every disk I have ever burned somewhere, though on top of me in my dreams, everywhere, everywhere).
The bottom is just speakers, and a cabnet with kids tv games, vsmile, a gun that hooks to the tv etc, a play station 1 (yea thats right, I have a frigging playstation 1 and games to go with it, what part of pack rat didn't you understand!!!).
The ultimate getto media center (its not even running media center though the bedroom is). Proof that you can do anything you want with a tv and a computer (simple file sharing and a wired network let you share anything through the whole house).
Fyi, I would have bought an lcd for it this Christmas, but prices were crap. I'm glad I waited, 32" prices are still crap (getting better but still crap), but I think I'll go 42". Looking at a toshiba (top of the line, 120hz, 1080p, etc), for 800$, 720$ if this guy at work gives me this coupon (wanted to go cheaper, smaller but 42" seems to be the sweet spot and I'm a cheap bastard, It could cost a million dollars, but if its a 2 million dollar tv, I'll buy it).
Of course I'll use the same entertainment center. If the middle fits, I'll strap it to the front, double side foam tape plexiglass across the entire front (5 minutes and the kids will break the screen), and the ultimate ghetto setup goes on with a nice new 1080p, 120hz toshiba......