I'm reading & typing this on a 36" HDTV.
I used to have a standard 27" hooked up. That was OK for a few games, but trying to read text or surf the web was pointless.
On a HDTV, the scan lines are removed, so text is much more readable. But is still not nearly as good as a monitor. But games like Unreal look pretty damn cool!
And yes, you are limited to 800x600, 60htrz. I'm using then TV S-Video out of an ATI Radeon All-In-Wonder.
If you are just overflowing with cash, Zenith is offering 27, 32, and 36 inch HDTV monitors that have actuall 600p support. So you can plug any 800x600 60htrz display straight in, no TV conversion needed. And quite a few HD Plasma displays also have computer inputs.