PowerColor's HD 3850 Xtreme is a good step forward in the right direction. The new card cost less, uses less power but still has performance which is often close to the HD 2900 XT. Doubling the memory size to 512 MB of GDDR3 was a wise decision to improve performance. The higher your resolution is, the more benefit you will see from the added video memory. However, if you plan on running only up to 1280x1024 there is not much to be gained from the extra memory unless you plan on cranking up the AA beyond 4x.
PowerColor's HD 3850 Xtreme is special compared to the other cards out there because it has a dedicated HDMI port on the board which makes this card a great choice for HTPC systems, if you have the space for the dual-slot cooling design. A minor issue is that the cooler does not exhaust the hot air outside of the case, but since the total power draw is very low this is not too much of a concern.