A Media Center Extender is able to do what you want. You can be recording the show on the PC and watch it simultaneously. You just cannot do that from another PC.
Since you posted this in a MCE2005 forum, your options are:
Buy a used Linksys WMCE54AG on ebay for between $50 and $100 but it will only work with MCE2005, not Vista. It also only supports SD, not HD.
-or-
Buy an Xbox360. The cheapest model that you can find will work. It is capable to display SD and HD and migrates to Vista in the future.
1: Dimension 9200 - Vista Ult, 2.4GHz Q6600 Core2Quad, 4GB RAM, 160GB, 750GB, 500GB USB, Nvidia 8300GS, PVR-150, HDTV Wonder, Vbox 3560, X360, DMA2100
2: HP m376n - MCE 2005, 2.6 P4 w/HT, 1GB RAM, 250GB, 400GB USB HD, Nvidia 6200, Emuzed MAUI, X360