First, the best design for a case is one which uses a Heatsink-Fan (HSF) combo that blows the air directly out the side of the case rather than into the case first. I like the idea of the Shuttle designs which allow the graphics card to blow air out the side.
The graphics card still makes some noise. If you are NOT going to play high-end games there are solutions with even lower graphics card power consumption such as integrated graphics. Ensure you get one with the hardware decoders for high-def and low-def MPEG2, H.264/AVC and VC-1.
NVidia now has a motherboard with integrated graphics which which are capable of turning OFF COMPLETELY the high-end PCI-e add-on graphics cards. It's called "Hybrid Power" I believe.
An ATI4850 probably uses about 25Watts in Idle power mode and close to 100Watts when fully used. The CPU, on the other hand will use less than 10 Watts in Idle mode. Even the dual-core Atom might be a good option for a non-gaming HTPC but motherboards are currently limited.
Power Supply: The 750W is a good choice. Power efficiency isn't going to be significantly different than say a 350W PSU and it means you have room to throw in a higher-end card later on.
HDMI:
This is very confusing. Most (or all) current HDMI outputs from graphics cards don't have full audio output. You have to TOGGLE the audio source. For example, a DVD or BluRay movie's audio is not sent to the video card it's simply routed out the HDMI dongle or HDMI output. It's a workaround to route the digital audio to the DVI-I output which normally just has pin-outs for Digital video and Analog video but now the digital HDMI audio pins are there (so the HDMI adapter or "dongle" only works with this card.) No audio from the audio card comes out this slot nor can both audio solutions be set to run at the same time in Windows. This setup makes no sense to me since it seems to require switching the audio source then rebooting to say, get BluRay audio then change in software and reboot again for Windows/gaming audio.
Also, except for a limited number of HDTV's, none have a PC-HDMI input meaning the HDMI input accepts only 480i, 480p, 720p, 1080i and 1080p inputs. There is NO resizing option such as 1024x768 for a video game. You must choose a single resolution and stick with it.
PC-VGA inputs only real disadvantage is that HDCP isn't supported so BluRay won't work (except a software workaround). One option is to have two separate inputs and use the TV/Video on your HDTV remote to toggle between your PC-VGA input or your HDMI input. It's not a bad idea actually until PC-HDMI is standard. However, unless there is an audio input which is grouped with an HDMI input on your HDTV you can't watch a BluRay movie without toggling audio solutions to the graphics HDMI output method, at least until all audio comes out the HDMI output. It may be possible there is a full HDMI output audio solution but I'm not aware of it.
Summary:
It can get confusing really fast. At this point if I was going to be watching a lot of BluRay movies I'd go with a Sony PS3. If you can, consider waiting a little while longer for something like a motherboard with Hybrid Power which has power-efficient graphics but sends ALL the audio out the same HDMI output. Also, at this point I'd go with Vista 64-bit.
If you can't wait, there are a lot of choices. You may even wish to look at the NVidia 9300 series which just came out. As for a good HTPC combo Gaming system, I think your component choices are excellent. If your HD4870 is in a normal case, leave the stock cooling intact to blow outside the case. If you can build a system in which the card is against the side, like Shuttle's solutions I'd consider the Arctic Cooling Accelero Twin Turbo.
http://www.tomshardware.com/reviews/nvidia-nforce-730i,2044.html