Cyberlink just released their PowerDVD Ultra software for playing back HD DVD on your HTPC, and since the XBox 360 HD DVD add-on is so inexpensive I think a lot of people are going to be scooping this up. HTPC is great since you can tweak picture settings to your liking, output 1080p/24 with the proper hardware, tweak the audio, etc. If you connect via VGA/component you don't need an HDCP compliant video card from what I can tell, though it'll need to be 256MB. You still need a beefy CPU (X2 4200 or E6400) however, and 512MB RAM minimum.
New features for PowerDVD Ultra include:
* Official support for the Xbox 360 HD DVD external drive
* Playback of high-definition Hollywood movie content
* Optimized performance for playback of high-definition video content on graphics cards featuring NVIDIA PureVideo, ATI Avivo, and Intel Clear Video technology
* Support for new next-generation disc features, like Picture-in-Picture movie mode, networking, iHD features, bookmarks, and advanced disc navigation
* High-definition audio with support for Dolby Digital Plus, Dolby TrueHD, and DTS-HD technologies
* 6.1-channel surround sound, ensuring compatibility with home theater audio systems, and audio expansion of up to 8 channels
* Conformance to the High-bandwidth Digital Content Protection (HDCP) specifications for the playback of premium content through DVI and HDMI connectors
* Support for BUS Protection ensures premium content protection via VGA systems.
There's a discussion on the software
here as well and though a lot of problems have been fixed since PowerDVD 6.5 HD DVD it's not perfect, but definitely a step in the right direction. Intervideo is suppose to be releasing a HD pack soon for WinDVD8, no information yet however on the exact release date.
Btw, Microsoft now officially supports the XBox 360 add-on for use on Windows XP and has released a driver for the two "XBox 360 HD DVD Memory Unit" devices. Just run Windows Update.