It works fantastic. I've been very impressed/suprised. I think it depends alot on the hardware. I'm running a Core i5 Quad Core desktop, 6 GB RAM with a mid level HDMI graphics card. I'm using an HD HomeRun for the tuner and we have a 2 TB drive dedicated for the dvr. You don't want to use your main hard drive as the dvr as it puts alot of stress on it and will cause it to fail sooner. Also, you'll need something big. Most of the OTA programming comes in 1080i and the connection to the tv is 1080p. It's every bit as good as cable/satellite and much better than "internet tv" (hulu, netflix, etc..) We're using the same pc for normal browsing, etc... as the tv uses but looking back, even if I had to drop $500 in hardware for it, I wouldn't hesitate.
One other thing, make sure you get a HTPC remote. I think mine was around $20 on amazon. Trying to use a mouse/keyboard while sitting on the couch will quickly sour the family on the whole idea.