Update: well Alex I took your advice in the end and got myself an xbox.
Even though my htpc has more power for emulation it's connected to my projector and after some experimenting I found that retro games just don't suit such a large screen. This mirrors what I found with films too - DVD disappointing so I switched to HD/Bluray.
So I've got an xbox and am planning to get a cheap second hand 4:3 LCD TV to use with it. I've seen a 20" Toshiba model which is interesting, it has component and VGA inputs and the native panel resolution is 640x480 so it should suit SD - my plans are for an xbox and possibly a dreamcast to play around with.
What do people think of the idea of the 20" 4:3 TV? I'm hoping it will be ideal for using WinUAE-X and MAME on the xbox