I'm a strong advocate of Windows Media Center, so I'm gonna show you a bunch of stuff you can do if you go that route. I'll use videos/pics where I can, so you get a sense of the interface and ease of use.

Get an ATSC TV tuner and an antenna and you got yourself some free basic network HDTV. And not compressed like it is on cable. See here for what channels you can get and here for what antenna to buy. You can then use Windows Media Center to watch and record you TV, watch your Netflix or even watch Hulu. And a plugin like SeconRun.tv will allow you to take content from Netflix, Hulu and anywhere else on the web to create a second TV guide full of internet content. You can tell it to play random episodes of whatever shows you put in so that you don't have to know specificlly what you want to watch, you can just 'see whats on' like most people do with cable. You can also rent movies on demand like you would from your cable's STB with the CinemaNow plugin included in Windows Media Center. Now there probably still will be shows you can't get with all these options, such as HBO or the like. If you decide to pirate these (I'm not your mother) you can throw them on your HTPC and view them from the video library.

This covers mostly just the 'TV' features of Windows Media Center. You also have all the aspects of any HTPC such as adding your dvd/music/photo collection to it, as well as internet sites, plugins, ect. all from a remote or mouse and keyboard within the Media Center interface. If you decide not to go the OTA TV route, then something like XBMC is what you will want.