You may have lost us when you said the coax in the living room has HD. HD requires a 'device' for lack of better terms to decode HD. Check into ATI Cablecard tuners or the HDHomerun for getting an HD signal to your MC. Otherwise your goal is viable, that's what MC is for.
Personally, my living room PC is dedicated to MC, my WHS houses all of my media, and I use my laptop for everyday functionality. I play games on my Wii and I no longer invest in "gaming" equipment. You may come to the same conclusion as I did; web browsing and game playing is to awkward on the living room PC. To sit that far back and tinker with a wireless mouse/keyboard is a bit hokey in my opinion.