Tivo runs on linux
I heard somewhere that Tivo runs on Linux. So, they need to somehow decode Micro$oft DRM'd Unbox files. Easier said than done since this does not exist for Linux and only exists for Windows. Also, most Tivo users are actually using it through DirecTV. Only 35% of Tivo users have a standalone box. This standalone box cannot do any HD. The series two box has only a USB port and you need to buy a 802.11b dongle. I don't even think the 802.11g exists for Tivo. The only product that will come close to good solution is Series 3, but that costs $800 and it just came out.
While I think Apple should include a DVD/CD drive in iTV and up the price by $50 (if they want!), I think iTV is a better solution than going after cable/satellite business.
A lot of people that desperately want a DVR don't realize that only 12% of the US household get their TV from rooftop/rabbit ears antenna. 88% get it through subscription to cable/satellite. These 88% cannot be served well with a DVR solution that is not endorsed by the cable/satellite companies. These companies are holding these markets to themselves and contrary to what people say it is going to stay that way for a while to come. It is wise for Apple to stay away from the built-in tuner market and let Elgato do that as an addon. However, by adding an upconverting DVD drive to iTV, Apple can effectively assist customers in getting rid of one more box (the DVD player). Most TVs in the market now have only one or two HDMI ports. While Apple might want to get away from DVD/CD distribution, they should position iTV 1.0 as a crossover device that can play users's DVD/CDs as well as streamed content (cached with a hard drive). The user can use on HDMI cable for all that, instead of yet another one.