I've been using a 1.66GHz Mac mini (w/2GB RAM) as a Vista media centre for nearly a year. It's been the most stable media centre I've owned.
My LCD res is 1366x768 the mini works at 1360x768 I haven't missed the unused pixels. Whether or not yours will work will depend on the native resolution of the panel and if the display is supplying accurate
EDID.
I've also been using optical audio without any problems.
You'll need a MS media centre remote and receiver. The built-in IR receiver won't work with the MS remote so you'll want to disable it in device manager.
If you won't need OS X you can delete the partition and expand the Vista partition in the Disk Management Console to use the full drive.
The video drivers provided with Bootcamp limit the graphics to 64MB. Don't use the Bootcamp driver installer, install the other drivers manually and download the GMA950 drivers from the Intel ste.