I am an avid PC gamer, but not a pro gamer by any means. I've played a lot of console games mind you, from the NES all the way to the XBOX360, but I have always preferred that mouse and keyboard combination - and the ability to truly customize my game, and my gaming platform.
 
I also, like some of you, now have a family - wife and a kid, dog and a cat. While I love my family, shutting myself away for hours back in my "man cave", as I like to call it, to play some PC games, doesn't always gel very well with the girls. And working in the web-hosting business, I get to sit in front of a PC a majority of my day. Coming home to sit in front of another PC for my entertainment has gotten less and less appealing over the years. Solution?
 

Build a rig for the living room!

• 1280x720 on my 720p Samsung 40inch LCD + a DVI to HDMI cable = loss of quality? 
  
  

• Sound quality

I am an avid PC gamer, but not a pro gamer by any means. I've played a lot of console games mind you, from the NES all the way to the XBOX360, but I have always preferred that mouse and keyboard combination - and the ability to truly customize my game, and my gaming platform.
 
I also, like some of you, now have a family - wife and a kid, dog and a cat. While I love my family, shutting myself away for hours back in my "man cave", as I like to call it, to play some PC games, doesn't always gel very well with the girls. And working in the web-hosting business, I get to sit in front of a PC a majority of my day. Coming home to sit in front of another PC for my entertainment has gotten less and less appealing over the years. Solution?
 

Build a rig for the living room!

• 1280x720 on my 720p Samsung 40inch LCD + a DVI to HDMI cable = loss of quality? 
  
  

• Sound quality

Really? I tried using a DVI to HDMI cable for my PC (9800GT, 1080p TV) and reading text that wasn't black or white was entirely impossible. It was all blurred, and no amount of playing with contrast, sharpness, and the like helped. Colors popped more nicely, but overall the text problem was irritating enough that I just went back to using my VGA cable. Then again, I sit practically three feet from my TV (it's only 32", I'm allowed to!) so, I guess that could be a factor?

You know, "results may vary" will probably never ring more true, especially for a project of this nature. 
 
Windows 7 gives you a lot more control over your fonts and display - so on the OS level, things look great for me.
 
I would imagine the type of TV one is using, the distance, size, and aspect ratio all play an important role. My Sumsung in particular has a preset "Movie" selection that works great for most games I have tried. Key phrase: that "I have tried". I still have yet to play many games in my library, so only time will tell. The colored text in World of Warcraft have been a bit jagged, but never enough to cause huge complaints on my part.
 
I will follow up with another post as I continue to play around with this setup.

I guess it's time for you to legally acquire some films to watch?

That's a marvellous idea.

I'm doing this myself on a 1080p set, and it works beautifully. I have one thing to add that is most relevant for 1080p resolutions: you need a very large TV if you are any distance from it. In the days of SD, you could get away with a 50" TV and sit 12' from the screen. Now, at 1080p, you need an 80" screen to view at that distance. Check out this calculator which will tell you what size you need based on the viewing distance.
 
I know you're probably rolling your eyes right now, but this is really a big deal. If your TV has more dots making up the picture than you can see at your distance, that detail is completely lost to you. This is especially important with a PC where you often view small text, but I have even noticed problems seeing my 360 copy of Borderlands which is only running at 720p! I have a 46" TV that I am viewing at about 8 feet. I really need a 55" or 60" to see all the detail at that distance.
 
If you keep that in mind, gaming on a PC from the couch is really a fantastic experience. You can get great deals on PC games. They run at higher resolutions than their console counterparts. There is more flexibility in the control schemes (Choose between keyboard/mouse or 360 controller). There are mods available. There are tons of reason to at least have a gaming PC available as an alternative to your console(s).

Yay I am not the only one who games on PC from the couch! I have my PC hooked up to both my 24" 1080p monitor using DVI and my 50" 1080p Pioneer Elite HDTV using HDMI at the same time. I use a wireless controller receiver to connect my 360 wireless controller to my PC for console centric games and a wireless mouse and keyboard for FPS and RTS games.  Granted I have this set up in my gaming / man cave I have been tempted to try it in my Home Theater. :)
 
You can find a pic of my set up here:
http://gear.ign.com/articles/101/1015212p1.html  This article if from when I won IGN's PC of the Week contest. This is a old pic I moved to PC near the monitor but the set up is the same.

Surfaces for mouse support and a good place to put a keyboard would be a major issue for me if I tried that.  Mouse+KB on the lap does not work, and leaning forward is even worse.

@Diamond: you can get one of those bed breakfast trays you always see on tv.

" @kitsune_conundrum said:

@Diamond: you can get one of those bed breakfast trays you always see on tv.

I've tried different flat surfaces on my lap, I need at least a few inches of height off my lap.  Unless there's some miracle in floating desk technology I don't think it's going to be an option for me any time soon. "

Could you just use that mouse on the side of the couch? Or does that get uncomofrtable? Seems like a good, spacey mousemat style place.

" Could you just use that mouse on the side of the couch? Or does that get uncomofrtable? Seems like a good, spacey mousemat style place. "

@pureguava: I use one of those fold out wooden breakfast tables for the mouse and keyboard. I use my couch pillows for back support. Works great, I can also roll my PC chair over to the TV if I wanted to be closer but I never really do that.

cool,i want to see this in a  picture. it sounds really coolt o hear that.

The mouse-on-the-couch issue is a tricky one for we PC couch guys.  
The solution I've found is the Belkin Cushtop - turned upside down and sideways, with an oversized/custom cut mouspad on top. 
Just sit it right next to you. The Cushtop is the perfect height to keep your elbow bent at a nice ergonomic angle, and the incline offsets the depression you make in the couch next to it.  
This gives you ample flat mousing space and a perfect surface for mouse.  
It's a small project with a big payoff in comfort and function. 

The best table for using kb and mouse on is definitely the Ikea DAVE. I have some photos up on my blog on what this setup looks like: http://www.shinyhacks.com/2010/09/how-to-pc-gaming-on-your-couch-or-sofa.html

I'm mad ghettoing it with a lounge room setup at the moment.  I just pulled one of my reclining chair's front and centre in front of the 55" and have used a piece of shelving as a desktop across the arm rests.  5.1 HDMI audio out from my 5870's to my amp make for a well awesome experience (Especially over my normal z-5500 PC speakers).