If you're looking for H264 1080p content, I wouldn't use a X1950. I would start from scratch with a system like this:
GIGABYTE GA-P35-DS3L LGA 775 Intel P35 ATX Intel Motherboard - $90 w/ free shipping
http://www.newegg.com/Product/Product.aspx?Item=N82E16813128059
Intel Pentium E2160 Allendale 1.8GHz LGA 775 65W Dual-Core Processor Model BX80557E2160 - $78 w/ free shipping
http://www.newegg.com/Product/Product.aspx?Item=N82E16819116036
A-DATA Value Series 2GB (2 x 1GB) 240-Pin DDR2 SDRAM DDR2 800 (PC2 6400) Dual Channel Kit Desktop Memory Model VDQVE1A16K - $44
http://www.newegg.com/Product/Product.aspx?Item=N82E16820211165
SAPPHIRE 100206L Radeon HD 2600PRO 256MB 128-bit GDDR2 PCI Express x16 CrossFire Supported Video Card - $58 after MIR w/ free shipping
http://www.newegg.com/Product/Product.aspx?Item=N82E16814102103
That's $280 to your door from Newegg. And the HD2600 has the best post-processing on the market right now. Despite being a great gaming card, I don't believe the X1950 has hardware-accelerated video decoding or any post processing. That will flood your CPU with the video decoding, and even a dual core Allendale struggles when there is no UVD/PureVideo help.
You can then turn your Northy machine into a decent older games machine or sell it on eBay (you could probably get $400-500, just because of the video card in it). That would net a profit of $120-220, and you'd have a purpose-build HTPC. Perfect.
Edit: I guessed you'd probably want a case (to contain it), and a PSU (to power it).
Antec NSK2480 (with Earthwatts 380W) - $115
WD 500GB HDD - $100-105
So at that point you're either $100 in or breaking even (with the eBay sale). And you can get an optical ($30) and you're good to go.