The poster is correct in that it is really just a iTunesBox. Because iTunes is so limited in its movie selection, and you really need a 3 Mb download internet connection for speedy, uninterrupted download, I don't use it much for movies unless they are already on iTunes.
BUT, it could be sooo much more:
1. It does a decent job of photo slideshows, but could also stream iWork and iLife projects (think school project presentations and family projects) and other program output from the Mac.
2. Upgrade the hardware slightly and open it up to Netflicks and streaming internet video channels such as BBC, CNBC, HLN, etc. (several posters have proposed this)
3. Add a BlueRay disk player option to provide an upgrade path for folks to dump their old DVD players.
4. The iPhone remote is great. Expand upon it and make that the keyboard for interacting with the TV/internet through the TV.
a. Read/ answer text and voicemail messages
b. display internet pages that are interactive with the iPhone remote
5. Add telephone answering/managing software to your Mac and stream results to the TV. Video voicemail is around the corner, and it will be done on the iPhone and the TV at home. So also add camera and mic inputs to ATV.
I think its great that Apple is "allowing" folks to hack ATV. But Apple needs to go beyond this and encourage hacking (publish some specs and provide more input/outputs to ATV). Remember that an infinite number of monkey can create great works of literature!