Good idea about making it "microcontroller". As soon as the Raspberry Pi is available on this side of the pond, I'd like to play around with one of those as well :)
One of the best ways to use Arduino with Home Automation is simple reed switches. On my test bench, I have an arduino connected to an off-brand rain tipping bucket for measuring rainfall. Each bucket tip is .01 / inch.
I want to get into water usage monitoring - again with reed switch...
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