They MUST add a DVR, or it will still be a non-starter.
DVR is good - Apple might swallow up TIVO. The timing for this is good right now, they might do it. TIVO has some good patent IP for the DVR concept.
Google threatens with their TV concept.
I don't think Apple TV needs to have DVR though. The Motorola or Tivo cable boxes supplied by your cable company already do that. What's good about the current Apple TV is that you can watch your photo's and holiday videos on the TV in style. any people have video cameras and regular digital cameras, but they don't really care about the Apple TV functionality that is already out there - the proof is that Apple TV really isn't that popular ( I absolutely love it for renting movies, and sharing photo's with friends and family when I entertain at our home, but most people don't have their photo's together enough to really care about family videos and family photo's on the TV - this is why Apple calls it a "hobby" right now).
Now with the Google TV threat, Apple has a reason to get moving on something for Apple TV.
More important than the DVR, I think they should be getting 42" LCD TV screens, and make the ultimate TV set that anyone can hook up.
Check it out - the big problem with flat screen TV's etc is that it takes a mega geek to set one up properly. Nobody just has the flatscreen TV on it's own, they always have some BOSE soundsystem speaker thing, some cable box, and a bunch of crap they can never figure out. It continues to grow and grow until the family has 17 IR remote controls all over the place and they then start scrambling for a Harmony Remote control system to handle it all. Apple could do all this much better, and people will pay for it if Apple can demonstrate that any fool can hook up their TV set without a snarling mess of cables behind the 2 inch thick flatscreen TV. It's the same farce as the personal computer was before the iMac. We have these beautiful flat screen TV's but every single one of them has 30 pounds of HDMI and RCA cables in behind. If one gets unplugged, the system doesn't work the same anymore, and the poor geek who has to set it up is left fighting with the snarling mess of cables. If Apple fixes this, it would be a good thing and a profitable thing.