This $99 price rumor is pretty ridiculous. It's more likely that a touch-sensitive remote to control the device would be $99 itself let alone the entire Apple TV unit.
Let's look at some of the components that a rumored A4-based Apple TV would include (taken from iSuppli's cost estimate on the 16GB iPad):
A4 processor and DRAM: $26.80
16GB flash memory: $29.50
WiFi & Bluetooth chip: $8.05
Audio chip: $1.20
Case and electromechanical: $35.30
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Total: $100.85
That charge for case and electromechanical does not include the iPad's screen or battery or even anything for a power supply. A new Apple TV might save a few dollars with a smaller/simplified case but that would be more than offset by the power supply, remote control (IR?), and external connectors needed on an Apple TV. In any case, the aluminum case on the iPad is estimated to cost $10.50 (so deduct a portion of that if you wish).
Now apply at least a 2X factor to cover packaging, marketing, shipping, and typical retail markup and you come to a grand total of $201.70 (probably too low, since we're not even including everything in our approximately $100 bill of materials).
Thus, it's pretty easy to see that a new 16GB Apple TV based upon the A4 processor would costs just as much as today's version (frankly, a pretty good deal at $229).