My no.1 requirement - form factor must be small as i want it to be placed next to my LCD TV.
If you are building a serious gaming PC then ITX cabinet is not possible. The smallest you can go for is Micro ATX like the CM ELITE 3xx series cabinet.
The best short with an ITX board I can suggest is the
Zotac Z68 wifi supreme
Its ITX small from factor
It has inbuilt Wifi that too wifi n
Supports sandybridge 2000 series processors
1155 latest chipset
gigabit lan
USB 3.0
The biggest drawback is the GPU which is a meek GT430. Now personally I am not sure how you define medium settings, but all the current gen games without AA, AF and least at a res of 1024x768 would not do justice to the game. GT430 barely crosses 30 fps for COD Mordern Warfare 2 with AA and AF turned on. The case is even worse with Battlefield BC-2. With fps touching just 10fps with all AA AF turned on and settings set to high @ 1080p. So even if you turn down the settings to medium you still have to switch off AA and AF to make the game playable (cross atleast 40fps mark). and as I said playing the current gen graphically/visually stunning games without AA, AF, soft shadows etc is like eating egg without salt or even worse eating egg without salf with its shell still on ....
And these are not the latest games I am talking about. The upcoming Battlefield 3 and COD MW 3 are just ****n visually spectacular and trying these games on these low end GPUs would be an insult in itself ...
My recommendation as a gaming PC is atleast get something in the lines of HD58xx series or nVidia GT 5xx series.
However there would not be any issue what so ever with this card (GT430) playing any HD movie, not even 3D, so its pretty safe in that respect (for HTPC)
No.2 requirement - Should be able to play most current games at medium settings and future games at low settings
Already discuessed abouve
No. 3 requirement - should be able to play Blue ray discs with a superb sound output via optical/co-axial to my Z5500
Another drawback of the ITX board I mentione above. You do not get any audio out except the HDMI and 5.1 Analogue out. So no optical/co-axial.
No. 4 requirement - wifi is a must and bluetooth may be optional
If you decide to get the above board, it has wifi inbuilt, else the best way is get an inexpensive router (like Linksys WRT54g, 1000-1200 bucks), get a wifi expansion card and make your regular ATX board wifi.
No. 5 requirement- wireless keyboard,mouse combo
That is no big deal I already suggested/mentioned the same.
Your move for decision ...