You do not have to copy them over. For it to work well you will need windows 7. Windows media allows for some shared content. So for example:
If you DVR a tv show on your Media Center you can watch it back on the TV with the PS3 or more accuratly your "extender". This works on most content as long as it is not copy protected (most stuff is not except for HBO and Showtime). If you rip a movie to your hard drive you will be able to search the movies and play them back as well. Some very cool stuff. If you look for Catastrophy's link from I think two weeks ago I have a few links up about this set up.
Jon