I ran a diagnostic program supplied by the creater of PowerDVD. All lights are green.
Not running full 1080p. Just 720p.
No 5.1/7.1 setup right now either. Just 2.1 in my living room. I'm pretty confident that in the next year one of the lossless formats should be available.
I've spent the last few weeks trying to pick which direction to go and the PC won out. I've had this PC for a while but it's very competent. I built it to do CAD, video editing and other engineering programs so it's not slacking, but it could use some upgrades. I'm not certain that everything will be working great, and would in fact, be surprised if it did. However, the price difference b/t doing this and buying a standalone or ps3 is an easy $200 considering I alread had the PC ready to go. Just had to add a usb audio pass through for optical and BD drive.
By the time I build my house next year (hopefully start next May), things will be more simplified and I'll simply upgrade whatever components are lacking.
Also, fwiw, I'm not doing a very intense setup. Basically, I'm just using my computer for basic media: music via iTunes, and movies off the BD drive. No storing of movies b/c I'm too lazy.