If this is your belief then it will cater to a very, very small crowd unlike the iPhone. It will not only be ubergeeks that have a problem with this. The average user generally has basic apps which are necessary for them. And yes, photo and video editing are two of them. When you mention that these people want to watch their movies, this also include home movies which they edit. These can be replaced by third party apps.
I don't think that this is just some content consuming device. I think that this is eventually where the Mac OS is headed. This tablet will be initially underpowered but it will be considerably moreso in the years to come.
The question I have is how open will this OS be considering Apple has shown recently that they'd completely lock down an OS.
basic video editing is likely and possible, such as already on the iphone. but you can't expect final cut to run. at least not in the near future.
this is to be a consumer device for primarily for consuming. yes that means playing back and basic edits of videos and photos, but do you really want to be encoding on a machine that's not powerful enough to run a fully powered os x?
it won't be a replacement for creators, but could be for consumers.