I know I'm posting in defense of blockbuster a lot here, I'm not some fanboy, but I will defend them because personally I like their service. I also had no idea people had such a negative perception of the place!
mattster16, you make valid points but the fact of the matter is - as is clearly evident in the posts here - Blockbuster has spent whatever goodwill they ever had with consumers, and even if they offered a superior product (which is debatable), most people would rather turn to companies like Netflix and Apple - companies that haven't been in the video game long enough to have left a bad impression on a majority of customers - for their video needs.
I personally think Netflix is overrated, but Blockbuster is just too disliked to have a chance at succeeding going forward. As you mention yourself, over half of movie rentals are done in brick and mortar shops like Blockbuster's core business, yet they managed to contract their sales by over 10% this last quarter from the year before, and also find themselves nearly a billion dollars in debt.
(Compare that to Netflix, which is growing at nearly 20% and has over $250 million in the bank...)
TV was designed to limit the potential customers base. This thing should have at least had an S-Video output and 4:3 support built-in.