There's an easy way Apple can do an end run around all of AppleTV's limitations: just make it stupid cheap. Sell it at a loss if need be. $49 tops.
Then, you sell at least as many to stand alone customers, probably a good deal more. But now it's also a near impulse buy as an iPhone/iPad accessory. Instead of having to convince lots of people that it's worth it to stream their iTunes library or look at Netflix and YouTube, you're telling tens of millions of iOS device owner that they can do games and AirPlay on their TV for the price of a BestBuy HDMI cable.
I know Apple doesn't do the loss leader thing, but making AppleTV explicitly a TV dongle for iOS devices and pushing it hard that way would likely quadruple sales overnight and go a fair ways towards locking up the living room.
I disagree with this. I think $99 is already low and don't think Apple should take a loss on a product if it doesn't have to.
Now, if they do offer an SDK and App Store that will increase economy of scale and supplement profits from selling content then I can see a natural lowering of the price point, but I don't think halving it would be best. Perhaps $79 after the sales from the $99 A5, 512MB RAM, 16GB NAND, 1080p AppleTV start to taper off as I don't see a reason for the hardware to be updated at the same rate as the other iOS-based devices.