Sort of. The way you presented it was to allow time machine to backup to the appleTV and "enhance" front row to use this content. If I got that wrong, then sorry about that, but if this is what you meant, then yes the device already does that.
No, that wasn't what I meant. Probably didn't make myself clear. All I meant was that Front Row could be tweaked so that it wouldn't totally freak out navigating its way around a whole bunch of files in unsupported file formats in order to find the media content that it was after.
1. Time Machine is Leopard only and appleTV is both Mac and PC. Just like in the PC world, many Mac users won't upgrade to Leopard until they get a new Mac. It seems like everyone has because we hang out here, but I haven't upgraded as Tiger is currently fine for me and to be honest, except for people on these boards, I don't know anyone that has upgraded yet. And I know tons of people that use Macs (I work at a university).
...and you make a bloody good point. But what I'm selling is the idea that further and tighter integration of Apple products can, does, and will continue to drive sales of Apple products and this Leopard / Time Machine /

TV integration could be another one of those things. Perhaps.
For example, Mr Wintel has an

TV at home which he uses with his Dell P4 3.0ghz machine. He loves the

TV, is obviously cheesed off that he can't buy iTunes content direct from Front Row on the

TV, but that aside he loves it. Content streams flawlessly and he's well happy. He got an iPod for Christmas and he's chuffed as chips with that as well.
The Dell machine goes belly up and he suddenly finds himself in the market for a new computer. He's already got the

TV, he does a bit of snooping about and finds out that he could be getting a lot more out of it if he were to buy one of the new Macs running Leopard. If he goes Mac, Leopard and Time Machine would turn his

TV into a backup storage unit
as well
Bingo bango. Hardware sales. One more switcher.
Granted, this might well happen without the Time Machine /

TV hook-up but...
2. If you have no interest in the real functionality of the appleTV (or think you don't), you would never pay what Apple would charge for an appleTV with a 250 or 500 GB HDD when an good external USB drive of the same capacity could be had for literally a quarter of the cost. On new egg you can get a 250 GB drive for about $80. A 160 GB appleTV is $400! This is not insignificant. If the appleTV matched the HD space of external HDDs, had Time Machine backup capability, and was say $150 more than an external drive, then maybe it would help. I just can't see Apple dropping the price that far.
...and if I'm being honest I can't see the price dropping that far but Apple have got to do something if they want to protect the iTunes ecosystem. Record labels pulling out, NBC (!?!?) pulling out. Drop the margin on the

TV, increase the functionality of it in some way, and secure the future of iTunes and Apple as a media content distributor for the forseeable future...
Bottom line is that

TV ain't worth a dime unless it has a large installed user base and that is never going to be achieved until there is a major reorientation in approach (...and I agree that iTunes purchasing and global content provision is key to this).
And just to reiterate how much I am behind

TV ...
Don't let

TV die Apple. Please.