After seeing Jobs presentation its clear that iTV primary function is to stream media from the Mac to the TV. Its not intended to be a DVD player, its not a set top box, its not a DVR.
Hopefully room will be left open for third party options to give it more functionality. Will it be able to stream media back to the Mac? Will it be able to sit between the cable box and television? Will it be open for third party software?
If so Elgato could make a device that captures the decoded cable box signal, send the decoded signal to the television, and use iTV to stream the signal back to the Mac for recording on hard drive.
Pretty useless (i.e. I wouln't even consider buying it) if I can only play movies that I buy from the iTunes Store
Well so far none of Apples hardware/software forces you to only use iTunes media, what does it benefit Apple to start now.
Why go to the time and expense ($9.99, $12,99, or $14.99) to buy one near DVD quality movie when for the same money, I can get all the movies I want in a month from Netflix on DVD?
The same reason people download music instead of buying CD’s. Convenience.
It will play anything quicktime can play, and quicktime (via flip4mac) can play wmp files.
On your Mac sure, but I assume this box will do its own decoding of media streams/files (it certainly will have to for video). So, unless Apple supports decoding of Windows Media files on the box, I doudt you will be able to do it. Same for DiVX and other formats Apple doesn't usually support.
I’m sure Flip4Mac would decode WMP files before it would be streamed to the box. You can save WMP files as QT in F4M.
As far as HD, I read (MacRumors feed) that the Incredibles clip played during the presentation was HD.
Steve said in his presentation that those were 640x480 clips being shown.
And I really hope in the future with hard drives getting larger and cheaper that Apple will look in to the possibility of being able to rip your DVD's which you can then access via iTV.
Not a snow balls chance in hell of this happening. Apple would loose all favor with content providers. Plus legal or not there are options for ripping DVD's and using the media as quicktime movies.