It contains plenty of code specific to PowerPC, such as optimization for G4s and G5s and Altivec, and PowerPC generally such as FPUfunctionaity, bus protocols, OpenFirmware, endianess and so forth.
Apple TV does run on a stock x86 processor.
However.. the reason for Apple to drop support for anything isn't technical, it's political and strategical. They don't want to support legacy platforms forever. It's hard to make a high quality product as OSX and keep innovating if they are to keep testing and making adjustments with nearly obsolete plattforms. The quality assurance matrix would be enourmous, the support costs will surmount the benefits. AND.. this goes for the surrounding ecosystem too. Third party developers don't want to support legacy platforms forever either.
OSX is great. I enjouy using even 10.3 today. And 10.3 run on pretty old hardware. If we fast forward to 2009, 2010 when 10.6 arrives, 10.3 will still run great on iBook G3s and first generation iMacs. But.. What kind of operating system would 10.6 be if they were to upport coputers like that?
In 2010 you'd probably get a new portable for $500 (4x3 GHz, 2 GB RAM, 300 GB HD) 10.6 included. Why on earth would you concern yourself with a 10 year old computer, with a fraction of computing power? Let it run legacy stuff as a home server. Put it in the closet where it belongs. Join the consumer bandwagon! Keep spending! Keep Apple happy innovating, not having to worry about old boring stuff.
Start saving $20 a month and you'l get a new machine in two years. I think you can do that, don't you?