and the ideal candidate for this product would be someone who has a huge archive of DVD movies to stream to several rooms.
That person would be an AV enthusiast. iTunes is not for an AV enthusiast.
When iTunes steps up to offer decent visual content it might have a role but right now it's useless. Why are they going to buy all the episodes of Lost to stream to their 60 inch SXRD in one room, LCD panel in the others and the projector in the main room when it's presented in a substandard quality and not even widescreen.
Alternatively they can just get a couple of HD boxes from the cable/sat provider and hook them directly with full HD widescreen broadcasts or just plug in an antenna.
Until then this is going to be perfect for watching poorly encoded podcasts on a HDTV or movies that aren't even widescreen and have no extras for the same price as a DVD!
The Mini was already a perfect device for this role. Throw in a large hard drive, just AV outputs, ethernet and and wireless connectivity for a multimedia keyboard and it was a standalone media center ready to go in anyone's living room that you could rip your own DVDs to.
In this case you have to have a main unit somewhere else humming away all day and stick this thing in the middle.