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It will be just fine. I've underclocked a x2 4850 down to under 2GHz and used that with a 5450 and SSD to make a very low power/noise HTPC that does 1080p perfectly.
Not trying to hijack this thread, but would an X2 4600+ work ok? It plays DVDs fine but I have never tried a Bluray yet. It has an HD 4850 512mb video card.
Also it currently runs windows XP, would upgrading to 7 be worthwhile, taking advantage of DX11?
I ran an x2 4600+ with a geforce 8500gt on win7 and never had any problems with bluray. If gpu decoding is working properly then the cpu is barely touched at all.
as long as you pair it with a card that has hardware HD decoding should be fine. I have a HTPC with a geforce onbaord graphics and x2 250 and it works great.
Note that if you need to play back 10-bit h.264 (pretty much only Anime fansubs at this time) your CPU will struggle, and 10-bit h.264 can't be offloaded to your video card.