Here's the issue: Netflix quality IS good enough for YOU. (And most of my friends.)
But it IS low quality, compressed, and looks bad *TO ME*.
Apple's probably going to aim for your market - not for mine. Unless they produce something better than the sum of a middle of the road TV + the functionality of Apple TV in one box then the product probably isn't for me.
If they stream 1080P Bluray quality (40Mbit/s vs. iTunes 4Mbit/s vs Netflix's 5 Mbit/s.)
Let's not forget Doby...