I had heard about new displays arriving at MWSF 2007 back in February. Since then, lots of other rumors about the new displays have emerged and this one is the latest. Having HDMI makes sense, as does also having HDCP. Intel has copy protection built into its consumer hardware which I'm sure Apple is using in the iTV. And yes, I'm sure the iTV has a hard drive of some sort.
With a new Apple display, an iTV, and a USB tuner, you can have a complete HDTV system. Just add a good surround sound speaker system. Apple may even be working on that, too. I wouldn't be surprised to see an all-Apple home entertainment system next year.
So, how do you imagine Apple will show off the iTV in its stores next year? Plug it into a Sony HDTV screen? I don't think so. It'll be plugged into a new Apple display for sure. If it has a black bezel, a built-in iSight would be invisible.
Will Apple have a display with built-in iTV like that rumor said a year ago? I have no idea but there was a lot of truth in that infamous rumor. The iTV is based on Intel's Viiv platform. Viiv was mentioned in the rumor. Front Row 2.0 was mentioned in the rumor and that's exactly what's built into the iTV box. A large flat panel display was mentioned and indeed, Apple is rumored to be introducing a larger than 30" display soon. That rumor also mentioned HDMI connectors and that's what the iTV has and the new displays are rumored to have.
Maybe that rumor from a year ago was just premature. It originated with some people at Apple, BTW. After it didn't pan out after Macworld 2006, it was thought the rumor was purposely planted by Apple to mislead the rumormongers. I sure caught a lot of hell here for mentioning it but it was a legit rumor, not something I dreamt up.
It looks like 2007 is the year Apple makes a major assault on the living room.