Well Im commited to building a dual purpose box. Here are methods Ive considered. I have heard success from each and i also know that none of these are supported uses from microsoft
1. Install Windows 7 Ultimate, Install Vmware 2.0, Install Windows Home Server (Favorite)
2. Install Windows Home Server, Install Vmware 2.0 , Install Windows 7 Ultimate (2nd Favorite)
3. Install Windows Home Server, Install WMP 11, Install VLC Player (Least Favorite)
Your thoughs, I know a 2 box system is reccomended but I'm techy, already have that goin on and would like to try something more unique as cable card support was just opened up, I think this is the time for such a htpc
First, let me I say I wouldn't do any of those options (I would, and do, have a 2 box solution). My main workstation doubles as my TV recording device (since it's on most of the time anyway), then I move my Recorded TV to my server for streaming.
Having said that,
IF I had to rate those options, I would rate those options in the same order you did.