The current generation of Atom and ION-powered Nettops deals with HD video material without breaking a sweat. Awesome (free) software has been around for a while, and works and looks better than ever before.
Cutting the cord and stopping to complain about bad TV program has never been that easy, really.
Here’s what you need/I recommend:
The first-choice components set you back about 480€ (went for 3TB external storage, though). I assume you already own an HDTV and an HDMI cable.
Put everything together (youtube helps), and then put XBMCbuntu on it. Here’s how you go about that.
XBMCbuntu comes with a GUI, so you can set up your WiFi and everything else pretty easily. I have to say that I had a few problems sharing files to a OS X machine, though. I then went with Ubuntu 12.04, installed XBMC the ‘old fashioned’ way and had no problems at all. Your mileage may vary.
I recommend the Aeon Nox Skin. If you’re new to XBMC, you should check out this guide on Lifehacker.