Microsoft had trouble getting people to run Windows in their living room. They had no trouble getting millions to put PC hardware in their living room as evidenced by the XBOX.
Calling the XBox "PC hardware" is really picking nits and missing the point, in my opinion. The problem with PC hardware in the living room is that no matter how you dress up an HTPC to resemble a piece of consumer electronics, it's all cosmetic, and it's still a PC in that it's not a fixed hardware configuration like a console. This makes the software more complicated, adds driver issues, support costs, hardware reliability is unknown, etc. The result is a tradeoff in how polished the product can ever really be. Geeks will put up with it. Regular folks probably won't. Again, my opinion.