I had the same problem when I was building a HTPC a year ago. At the time I ended up getting a cheap $20 desktop case and a long HDMI so that I could hide the desktop. When I built my second HTPC, I got the Zotac ZBOX (about $200 right now on newegg). I run the xbmc-live distro from a 4GB USB flash drive in the computer, and it runs great (1080p streaming from a network drive or youtube works flawlessly thanks to the recent v10 of xbmc). As for control, you can either use an iphone/droid, an IR receiver (iguanaIR is what I use), or a keyboard/mouse.