As someone who has long awaited a 1080p-capable

TV, this is about the best rumor I've seen in a long time. And I'm not a bit surprised to see the same tired-old gripes from the "720p is good enough" crowd, as if getting better technology in a next-gen

TV (as this rumor would have us presume) somehow adversely affects their ability to watch their 720p or SD to it's maximum playback potential. 1080p-capable hardware will have no problem playing your 720p or SD software; it just doesn't work the other way for those of us that care about better picture quality.
For those griping about bandwidth, storage, etc, I would suspect that just as there is currently options for the 720p OR SD version, I would imagine this "HD+" option will be just another version you can choose. Don't have the bandwidth for it? No problem, continue to choose 720p or SD. Don't have the storage (really? with hard drives as cheap as they are???)? No problem, buy the 720p or SD version. Etc.
1080p will finally make this a real challenger to "the bag of hurt" in the way that matters most: picture quality (and hopefully sound too). FINALLY, consumers can have a real, iTunes-friendly challenger to the biggest benefits of BD players.
For me personally, it will be soooo nice to finally get to play back precious home movies I've been shooting in 1080 on consumer camcorders for years (since about 2005 or so) without having to downgrade the clips. Apple gave us iMovie HD in 2006 and it could work with and output 1080 HD files just fine. iTunes has long been able to import and play back those files. I've had 1080HD HDTVs since about 2001. This final link in the chain is long overdue.
I think this will be a very hot seller for the holiday season (assuming it's coming out with the iDevice refreshes this year). I know I'll likely buy 2 or 3 myself on the day it arrives. The current model seemed to sell pretty well even though it was still limited to 720p max output- just like the 2006 version I own. Now, Apple can give the "full HD"-minded Joe Sixpacks a "full HD" alternative to BD. At last!!!