I think the AppleTV could be a great success for Apple, perhaps not as great as the iPhone, but successful none the less. I can foresee several different model type AppleTVs in the not to distant future, and third party software specific to that device. I think that they will soon come out with a model, perhaps more a Mac-Mini or a double-wide AppleTV with full OSX capability and a Blu-Ray drive with true 1080p HD output, wireless mouse and special multi-media keyboard. A double wide case could use standard size hard drives with cheaper, higher capacity storage space.
It should also have an external SATA connection to allow the main unit to connect additional “matching” extended hard drives. (OWC/Newer has a Mini footprint and style 750gig firewire external hard drive). It will also be able to record like a Tivo and be programmable the same way. It should also be able to connect to the iTunes store directly.
So really all AppleTV would have to be is a Mac Mini with additional AV outputs, and the cool simple interface it now uses triggered by a slightly more useful remote or controlled by an iPhone. Professional stereo equipment conforms to the same 19″ rack standard size just like computer racks. Even a 3×19″ high unit would conform to the size footprint of consumer electronics. AppleTV already looks sort of like a Mini anyway, doesn’t it?