HTPC help

[Col. Mustard1]

I just got a new Sharp Aquas 1080P LCDTV, and I don't have any of the other needed equipment such as a good A/V amp for surround sound, a DVD player, etc... but I do have my Gaming PC. is there any way to avoid having to buy a bunch of other equipment, maybe turn my PC into a so-called "HTPC"? I would mainly use it for movies/videos, music, pictures, gaming, and watching DVDs. (I noticed some DVD players advertise something called "upconvert" where they bring normal DVD's up to 720 or 1080 resolution... is it possible to do this with a PC?) my current system specs are:
CPU: Intel C2D E6300 OC @ 2.45Ghz
RAM: 2GB DDR2 667
MOBO: Asus P5N32-E SLI Plus
GPU: Nvidia 7600GT 256MB
Sound Card: Creative X-Fi Gamer
Optical Drive: LG LightScribe DVD+-R/RW SuperMulti Drive
HDD: Seagate 300GB 7,200RPM SATA
OS: Windows XP Professional