Media Portal is much better than Windows Media Center. Media Portal is also better than XBMC if you need TV tuner support. http://www.team-mediaportal.com/
* I've settled on the AppleTV because it's $99, so not much of a loss if it doesn't work out.
* Most of my videos are already in an MP4 compatible format already DVD->Handbrake->Apple Universal preset.
* It's dead quiet, no moving parts, no fans, and 6W of power.
My problem with the HTPC is it was a full Windows stack so it included all the headaches of antivirus, updates, configuration, and UAC prompts required a keyboard be nearby.
I can certainly see why some people have the inclination to go with a HTPC but I don't have the time nor the space to keep PC in the living room. And now, XBMC has been ported to the AppleTV so you get most of the functionality of the Windows application on an inexpensive device.
This was my main problem with an all-in-one HTPC. It was amazing when it worked, but my housemates didn't appreciate it for the 1% of the time when they couldn't watch TV because of a crash, or Windows Update.
Apple TV with XBMC for $99 is damn difficult to beat. I might need to visit the Apple Store soon.
But as I said before, some people will have the need for a HTPC. I have a moderately small apartment and don't watch that much TV. I realized, a while ago, that keeping a dedicated PC, recording shows I'll probably never watch, running 24 hours a day was futile. If there is something interesting I can watch it live, download it through iTunes, or pull the occasional torrent.
Edit: Oh, and XBMC just gets added as another menu item, so you can still use the regular AppleTV ui too.
2. No idea. If I had to guess it wouldn't be harder than the original jailbreak, and potentially much easier.
3. You can use your iPhone/iPod touch's Remote app to control the ATV (the remote it comes with is a pain for text input) [No jailbreak required]