Currently, I have my old PC connected to 50" Sony HDTV(1080p). I want to know the best possible way to customize and tweak my pc just for video viewing experience. The drivers, the configurations, best software for playing video, may be some hardware accelaration?
I have p4 2.0 ghz and nvidia ti4600 graphic card and 1.5gig of ram.

Any good specific tutorials/advice out there for such optimization? Is there any good software out there that would calibrate it automatically?

Most sources say you're not going to be able to get 1080p playback on that without dropped frames (multi-core is pretty much a necessity), but if you're talking scaling SD video for viewing on an HDTV, VLC is always a good bet as it has a lot of tweakable options for smoothing, filters, etc. Just make sure you have good source material - 700MB DVDrip downloads of full movies are going to be very hard to make look good on a display of that size. DVDs, on the other hand, should be fine, and while it's been a long time since I worked on the P4 PC I used to have at a previous job, you might be able to pull off 720p video fairly decently. That probably has more to do with the codec and compression ratio - lighter compression 720p (and all video, for that matter) will work better at the cost of more disk space - less number-crunching the CPU has to do in order to decompress and display it. XviD or DivX will be easier than x.264.

As for acceleration on that GPU, I must admit I'm clueless. I'm a bit spoiled for having a Mac as an HTPC, and most video card settings are handled automagically so I'm less experienced when it comes to optimizing. Also, I know NVidia has something like "TrueVideo" or "PureVideo" on some cards that does MPEG-4 acceleration, but I have no idea which models feature it.

I do use vlc player but I am n00b at tweaks such as smoothing and filter and such

VLC Player by far uses less resources for video playback I find as well.
As for playing HD content from PC to TV, you'd need a 6 series Nvidia card / Dual core CPU to handle it at least.
As for filters and stuff I don't use any at all with VLC, I use as is. It works and looks great once installed.

you need to upgrade the video card to something more powerful - the rest of the specs should be ok.

how do you connect the PC upto the TV? I personally suggest VGA @ LCD native, but HDMI seems to be the choice for most people now days, especially with audio via HDMI.

you don't need dual core to play hd video. i don't know why everyone keeps saying that. that video card is lacking though...

Just make sure your pushing 1920x1080 and calibrate it using a THX calibration utility or something, certain DVD's include this, sure you could download it too.

Really? I've been able to do 720p fine on a PowerPC G4 867MHz and an Athlon64 3000+ 1.8GHz, but I thought for 1080p you pretty much needed some form of SMP setup.