I personally think HTPC should be controlled with small Remote control, preferably same one you controlling the volume and change tv channels.
All-In-One machine you are using imo doesn't typically fit the profile due to fact your pc is build-in large display.
To upgrade or not is your choice, but most people agree for aesthetics factors HTPC case is typically something resembles audio/video component and about same size and like I mentioned controlled remotely.
I don't record my tv on my htpc, I use it solely as a media client, therefore my htpc specs are very humble Atom 330/ION/2gb ram (pics in sig)
Not much to talk about, but its capable of displaying upto 1080p HD videos/DTS sound and controllable from my Harmony remote - that's all I care about for now.
However there are bunch of people here, who love to have a bit more juice to their HTPC pcs and have really nice cases and a lot of pc raw power in them...