Some questions for you, if you're using a MediaCenter:
1) What MediaCenter are you using? (Provide link if possible). Any special reason you chose that one over another?
XBMC. I chose it because:
Good support for TV cards, recording etc (I'm using TV head end).
You can set up emulators with it pretty easily.
Good systems for automatically getting movie/music metadata automatically without me having to rename all my files or something.
Lots of good plugins: navi-x, tvcatchup, youtube, grooveshark etc
It's linux based, and I don't own a copy of windows. The only problem with this is some systems don't have decent emulators on linux.
2) Do you find yourself moving completely away from physical media, like DVD's and Blu-ray Discs?
No. We still have a lot of DVDs and people will still buy you DVDs, so you sort of have to live with it. We also make a point of buying DVDs of stuff before downloading them, but the DVDs generally just pile up in the loft. The media center has a DVD-RW drive.
3) What is your primary reason for preferring a MediaCenter? (Online streaming? Getting rid of physical media? Other reasons?)
Having everything in one place and fully under control. In the loft I have a lot of consoles set up with a TV and a sofa, but in the living room I have to keep the peace by keeping it minimal, so I have the media center and an xbox 360 and that's it. I can play movies/music/emulators and watch TV. In XBMC I've got emulators for pretty much every system up to the N64 and PS1. I also have XBMC on an original xbox in the loft which I mostly use for DVDs and watching TV through tvcatchup.
However we got a Sky +HD box recently and I've been using it less since then, as the Sky box does make it easy to watch TV and record stuff.
4) Have you spent a long time creating ISO files of your DVD's and/or Blu-ray Discs so you could store your movies in your MediaCenter?
No. In my experience it takes way too long and needs you to constantly change discs and stuff.
5) Or do you just download movies from somewhere? (In my book, it must be legal to download the movie if you own it already?)
I'm of the same opinion. From my undergrad degree (admittedly a while ago) I know that legally speaking it actually isn't strictly true - I believe the license doesn't even allow you to make backups. But the law is still catching up and I think if you get accused and the first thing you do is prove unequivocally that you have bought DVD copies of every movie on your hard disc then realistically nothing is going to happen to you.
6) Do you buy digital movies, or do you just rent them? Or do you pay a monthly fee to watch all you want?
We don't buy them, but we do rent from Sky sometimes. I'm thinking about dumping the sky subscription soon and getting netflix or something instead, as we really dont use it enough. We got a year of sky TV free when O2 broadband were bought by sky, but it will run out quite soon.
7) How important is resolution of movies to you? Is 720p (DVD) plenty enough? Or do you appreciate 1080p (Blu-ray)?
I'm really not all that bothered. Our TVs are both 720p, but I'm actually pretty happy with standard def most of the time (unless it's a particularly spectacular film). 720p is nice to have though.