Most of the reviews I've seen put the 4200 and 3200 level pegging in games - the only real difference is that 4200 has UVD 2 rather than UVD 1 which would probably make it slight favourite for an HTPC. There were rumours of a minix 785G mini-itx board but it doesn't seem to have made it to retail (and it would probably cost ~ £100 just for the mobo, anyway...)
For £150, you can get an
Acer Aspire Revo from ebuyer: Atom 230, NVidia ION, 1GB RAM, Linux pre-installed on a 160GB HDD. No optical drive, obviously - but it sounds like that isn't an issue for you anyway. As long as you have playback software that can utilise hardware decoding (or CUDA, incidentally) it should handle 1080p playback easily.