If i had a desktop and a good desk i might watch movies there. But i use my xbox 360 with connect 360 connected to a G4 tower to watch my movies and tv shows.
Front Row if they're in my iTunes library, Quicktime if they're downloaded DivX's. But most of the time it's Front Row.
On XP Quicktime doesn't deactivate XP's screensaver or sleep timer so I use VLC there. I'd use VLC in OSX too but I like remote support and it's a bit fugly.