I think there's (at least!) two separate debates going on here -
- what is the best home entertainment network design/topology?
- how well does the iTV serve the topology Apple has chosen?
The first question is a doozy. Personally, I think Apple's choice is a bit unwieldy. Have your entertainment network rely on your Mac/PC is fine; except when you need to restart after installing software (could the hard disk in the iTV buffer enough content to keep going until the Mac restarts? Possibly). Another problem is if your home PC is a laptop, which might not be in the home, or will sleep if inadvertently shut.
Also, it is a bit tedious if you have to get up from your sofa to your Mac, start downloading the film/show, then return to the couch and wait for the film/show to start playing. Wouldn't it be far better if you could purchase the film via the iTV, without having to go to your Mac/PC? (If this is possible, feel free to ignore this paragraph.

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Personally, I'd prefer to have a home entertainment storage server, essentially something akin to the iTV but with a large hard disk (or RAID) attached, which stores all my iTunes and other media. Anything I buy on my MacBook - songs, TV shows, movies - are backed up to the server when I plug it into my home network (could the Leopard backup APIs achieve this?) and thus always available regardless of where my Mac is. And, I'd watch far more moves if they were just a menu click away, rather than rooting around the house for a DVD case.
As for the second question, if you accept Apple's argument that the Mac/PC will be the entertainment centre for the home, the iTV is probably the simplest device you could come up with. It's basically an Airport Express with "AirFlicks".
One thing puzzles me though - the iTV is not a complicated piece of kit, hardly any more so than the mini or any other Mac. So, why did Apple pre-announce earlier this month for release early next year, and not release a finished product?
Did they think of it too late to finish it in time for the iTunes Movie store announcement? Unlikely - people have been calling for video streaming for some time; and Apple would have been working behind the scenes on the iTunes movie store for some months. The fact that they appear to have finalised the configuration, aesthetics and price would indicate it's more or less done. More likely - iTV is waiting on some other key piece of technology before it can be released. And the obvious answer would be - Leopard.
iTV isn't being released until the Leopard timeframe, and Leopard has major unannounced features which we won't hear about until Macworld '07. Could it be some Mac media centre functionality as some have suggested?
p.s. as for a name, how about the "Apple Jack"? Rhymes with Apple Mac, and implies "jacking" all your content into your TV? Whaddya think?
Eeek! sorry. This post was far longer than I expected!