bottom line: the mediasmart won't be able to decode on the fly the hidef (1080p) stuff (.mkv etc) to your liking.. you will see the infamous blockies..
or if you are going with avi's / vob's it'll be ok..
hence if you want to go hidef, you'll need to offload those duties to a local box (popcorn, xbox, sage, htpc and many others)
that's how i see it.. the hp
would however be a great server and also consolidate your iTunes etc... and the major benifit i get is the set it and forget it, auto backups of all PCs on your LAN.. this has saved me 2 times... its basically your local version of 'carbonite'