What do I need? (Hardware and Software)
Well, I'm happy you asked!
Of course you are going to need a HTPC. You can see the AMD HTPC that we setup last year over here. Its hardware is a little old now, but it is still more than capable as a HTPC and I still use it to this day, except with the replacement of the video card.
You are going to need a relatively new amplifier that supports the new Blu-ray HD audio standards. I use the Onkyo TX-SR705, which is a HDMI 1.3a certified amp with many of the new bells and whistles. It is over a year old now and still does a fantastic job. The HDTV, projector or other type of display that you are using doesn't really matter in this case since it connects separately via another cable from the amplifier to the display itself. We won't go into speaker or subwoofer choice selection here as I'm not experienced enough and that could have a full guide alone.
Your computer will also of course require a Blu-ray ROM drive. I would highly recommend picking up an internal SATA type rather than an external USB 2.0 drive or an old internal PATA type. You are also going to need a HDMI 1.3 (or later) cable to connect from the Radeon HD 5000 series video card to your amplifier. Do remember that a single HDMI cable will carry your audio AND video data signals to your amp.
The most important part of these ingredients for this guide is the video card. We are using a R5750-PM2D1G video card kindly supplied to us by MSI for this guide and you can see it pictured just above. It is based on AMD's ATI Radeon HD 5750 GPU and comes with 1GB of onboard memory. It's a good little video card for some moderate gaming, but it provides the magic for the bitstreaming to work in our HTPC. Keep in mind that you don't need the HD 5750 GPU in particular; all GPUs in the Radeon HD 5000 series support bitstreaming from the extreme high-end HD 5970 (dual GPU) down to the cheap HD 5450 card.
The choice will depend on your budget and if you want the video card to provide extra capabilities for your HTPC such as varying levels of 3D gaming performance. The card MSI provided is not silent with passive (no fan) cooling, but it is quiet. When you're watching a movie, you will not even hear your HTPC in the background anyway. For that reason, I would recommend a video card with active fan cooling - unless you are one of those complete silent computer folks out there who loves silence. I've had experience with passive coolers on video cards in the past and while they work fine, they get hot and that's not something that generally mixes well with electronics.
With the basics on hardware covered, we move over to the software side. If you aren't already, you will want to be running Windows 7. It doesn't really matter which flavor of Windows 7 you are running, but Ultimate is recommended if your cash extends that far since it is the most feature packed version. Cheaper versions such as Home Premium will work just fine, though. As for the movie playback software, there are a couple options out there, but we used CyberLink's PowerDVD 10 - we used build v1516 in this guide for your reference. Keep in mind that not all previous versions of PowerDVD provide bitstreaming support, so make sure you grab the latest version and build that is available to you.
As for drivers, you'll want to grab the latest ATI Catalyst driver for your Radeon HD 5000 series video card. At the time of writing it was Catalyst 10.3 and you can grab it here. Do keep in mind that some older ATI drivers do not support bitstreaming and generally speaking it is a good idea to keep your systems updated with the latest drivers and updates anyway.