Microsoft continues its quest to convince people to watch TV on their PCs with today’s announcement that Netflix subscribers can finally stream more than 12,000 movies and TV episodes through Windows Media Center. But there’s a catch; two, actually.

First, the feature is available only to customers running Windows Vista Home Premium or Windows Vista Ultimate; if you’re still rolling with Windows XP Media Center Edition, you’re out of luck.

Okay, so we can’t expect Microsoft to continue enhancing XP when Windows 7 is waiting in the wings. But what about people who bought Windows Media Center extenders—especially the new breed that are compatible only with the Windows Vista version of Media Center? Sorry, you’re in the same boat. Microsoft won’t be extending the Netflix feature to that hardware. Microsoft figures if you’re savvy enough to set up a Media Center Extender, you can figure out how to install one of the third-party Media Center plug-ins that already enable Netflix streaming.

“The enthusiast knows how to install a Media Center plug-in that can do that,” said Ben Reed, Microsoft’s Senior Product Marketing Manager for Windows Media Center. “We’re focusing on delivering the best TV-watching experience on a TV. There’s Hulu and all the network portals for watching TV content, but the consumer faces a different user interface with every site.”

The consumer’s other option, as Reed pointed out, is to buy an Xbox 360 (along with an Xbox Live Gold membership). But this space is crowded with other competitors, too, including the dead-simple Roku box and Internet-capable Blu-ray players with built-in Netflix clients.

Although we weren’t able to access the new service before our story deadline, the user experience Microsoft described to us does sound compelling. For starters, you won’t have to open your Netflix account in a web browser and add movies to your “Watch Instantly” queue before you can begin streaming them. You’ll also be able to search the Netflix library using a filter that shows only content that’s available to watch instantly. Reed told us subscribers will be able to manage both their disc-rental and watch-instantly queues from within Windows Media Center, which should be a improvement over standing in front of your TV to read the small text. Lastly, the Windows Media Center edition of Netflix is designed to work with any Windows Media Center-compatible remote control.

If you need another reason to build a home-theater PC, here it is.