Along with the other wants already shared, here's a few more:
Modern audio codecs (Dolby Digital came out in 1991) at least on par with Blu Ray.
Support fps rates other than 30: at least 24fps for native film and 60fps for sports shot with camcorders (since 2010).
Up the bit rate playback capability on par with Blu Ray.
Normalize the USB port so that people can attach any size local storage if they want that, so that Elgato or similar could add DVR features for those that want that, etc.
Analog audio out so that Zone 2 receivers can be fed without having to get an optical-to-analog adapter.
Network storage option (too) so the parent Mac can be turned off and or taken out of the house and still have a fully functional

TV.
Revive some software features of the first gen such as using the "Show" tag and the better presentation of TV shows.
Clean up the UI. Personally, I still think the final incarnation of the first generation

TV was the best UI so far.
Resume an intuitive, "just works" approach to the UI such as putting our own movies in "Movies", our own TV Shows in "TV Shows", etc (again just like how it worked (well) in the first generation).
Maybe 4K too, as there are camcorders out now that can shoot it and 4K TVs have now been out for a couple of years. I suspect CES in January will roll out a variety of 4K camcorders at better prices. And even if iTunes store offerings don't go 4K anytime soon, camcorder-shot video and photos would look great in 4K.