If you going to use the HTPC in a home theater setup I would get an X-fi Card as it has some nice EQ features, and as I tested it, had a pretty nice frequency response (pretty flat). I also am 99.9% sure that you can get sound from games with the optical on the x-fi.
The only thing that concerns me with your PC is the processor. I have been using vista since the RC1 and I just worry that it won't run it to well. Now if its just going to be a media center...than the processing wont really that crucial, but if I were you I would get an intel C2D (you'll have to change the mobo), as you might want to use it one day for internet radio, and possibly bigger things. I'm not sure if I understood, but if this is for any sort of gaming, the C2D is the way to go.
Also, with the very low price of ram right now...may as well throw in 4GB. (Make sure its a good make, crucial, corsair, patriot, g-skill)
those would be my thoughts on your HTPC.