Requiring the use of an incredibly expensive smart phone or tablet computer to plug the holes in the incredibly limited functionality of ATV is completely absurd.
The ATV needs to be able to stand on it's own two feet, and it's still incapable of putting on much of a show. The Roku box offers much more, and an Xbox or PS3 offer vastly more. Apple need to either open the ATV to third party apps, or just actually give a damn in bringing new internally developed apps to the system.
I live in the UK where BBC iPlayer is the no.1 streaming service by a mile. Nothing comes within even 10% of it's market share for real content. (I'm excluding Youtube etc) And yet there is no BBC iPlayer on the ATV. That alone is a deal breaker for most people in the UK. Even in the US the ATV still lacks Hulu support, which I can imagine is also something of problem for many.
In short, Apple need to try harder. Much harder. And give the ATV a good looking UI too, as the one they have now, pre and post tweaks, is absolutely hideous.