Nice points, all.
Apple/iTunes Lock-in
For the record, I live in the US and have purchased ZERO content from the iTunes store, yet I still think the Apple TV will be pretty useful. The only necessity is that it IS an iTunes product. If you despise iTunes for whatever reason, this product is a non-starter for you. I think Apple figures they are okay here because of a little device called the iPod... plenty of people are happily using iTunes for their content already. Even video management is pretty solid now. I remember with iTunes 6.0 I swore it would be a cold day in hell when if I ever used iTunes for video management. Buy, in anticipation of the Apple TV I gave it a shot and I started using iTunes for video management and you know what? it works just fine. Leaps and bounds better than it was in the pre 7.0 era. And if I don't want to deal with iTunes I just drag the file to the desktop and I can use Quicktime proper.
Resolution
While maybe 720p is not quite as awesome as 1080p, getting ANY content in HD (anything above 480p) is near impossible at this point in time. Some random trailers and content recorded with HD Tivo, really. Fact is, the vast majority of content that even the most bleeding edge of us watch is 480p. Watching things in 720p would still be vast improvement for most things. People need to keep in mind that thing is limited by tech: as a *streaming* device, 1080p is just not feasible, even with draft N. Show me a device that can stream 1080p realtime without wires. By the time a new wireless spec comes around, I have no doubt the Apple TV goes 1080p. And, BTW, the Apple TV runs in 1080i for it's interface should you desire, it just can't handle content beyond 720p.
Music and TV Navigation
For those complaining that you "need" to use the TV for music with the Apple TV: how the hell else are you going to navigate thousands of songs? On a tiny LCD readout on you receiver? The TV navigation is a huge PLUS here! You can just turn off your TV once you've started playing your music if it bugs you (assuming your not using your TV's speakers...). There may be some negatives with video, but for music the Apple TV seems to be virtually flawless. Yes, other products do similar things but the interface is the key, as with all things Apple.
Surround Sound for DVD Rips
I will admit, the biggest puzzle/thorn has been the lack of surround for DVD rips. I am confident a solution will be found for this. That said, If I'm being really anal about video/sound quality I'm watching Blu-ray/HD-DVD anyway, not standard DVD, so no surround for standard DVD is not a deal breaker for me (but I understand it's probably a bigger issue for others). But aside from this: yes, Handbrake is awesome and dead simple and makes ripping DVD's a breeze and they work perfectly in iTunes.
Podcasting in the Living Room
One thing nobody has mentioned that I'm also very excited about is that this device will finally bring podcasting to the living room. I can integrate things like Rocketboom and TikiBar or whatever into my normal television programming rather than having the two segregated worlds of "things I watch on TV" and "things I watch huddled over my computer".
DivX/XviD and codec support.
Let's be real: these are the codecs of pirates. Yes, more legitimate uses have sprung up but by and large the mainstream world is ignoring these codecs. Apple supporting them would be akin to saying "we don't support pirated content" while winking and nodding. Yes, it would be a pain to have to re-encode the content you have, but think about how you got this content to begin with and you can see why Apple can get away with ignoring it. Technically, h264 is roughly as good (some say better, some say worse, I don't want to debate this particular point). Given that, and the fact you can't expect WMV support (Microsoft's fault more than Apples), what important codecs is the Apple TV really missing? Real? Real is a solution to a problem that doesn't exist anymore, so why even bother with it? I never even come across it anymore...
If I have component X and Y and Z, I can already do most of what the Apple TV can
Elegance and simplicity ARE features. I am very well capable of shoehorning some components together to mimic most of the Apple TV's features. But if the Apple TV exists, why bother? The interface and experience are more solid than anything else out there (save for Windows Media Center, but that's using a somewhat different philosophy and obviously doesn't work well if you want to stay with OS X).
So, if I got it right, the Apple TV is not useful to you if a) you hate iTunes; b) you have tons of Xvid/DivX files; c) you refuse to watch a DVD rip without surround sound d) your home-theater/lving-room set-up isn't really all that better than your Mac's screen and speakers. Otherwise, the Apple TV can offer all your computer media in your living room, with an interface superior to any alternative solutions, which is at least potentially useful to a lot of people. Is that fair?