A HTPC would be an excellent choice. I play back everything I have that way, no need to blow money on disks, or spend time converting, etc.
Bought a PS3 with hopes of doing things that way, but I haven't used it for that.
A quick google search though says use TSMUXER to convert them and IMGBURN to get them on a disk. I love IMGBURN although it's not all that intuitive sometimes. No experience with TSMUXER though.