Simple enough: I watch a lot of movies and news. Can apple TV replace this? How big is the movie library? From what I understand, live things (Like sports and news) can't be transferred to Apple TV, though recorded programs can. Is there a way apple tv can replace cable and dvds? Or maybe will there be a future version capable of this?
For movies, the itunes library is not too small but not big either. It has a lot of mainstream popular movies, but some are always mysteriously missing. Some are there for a while then gone. Etc. It also has a fair amount of classic films, but never enough. In general, I find it pretty dependable to be able to find movies I like, but to each his own. I suggest going into the iTunes store movie section and searching for films you like.

TV will have a fair amount of those movies in minimal 720p (which will generally look better than DVD).
For movies you don't find, it is relatively easy- but time consuming- to convert DVDs to movies you can add to your iTunes library. As a general rule of thumb, if quality matters, budget about 2.5gb per film. So, if you have 200 all-time favorites, you'll need at least 200 times 2.5gb of storage space just for those favorite movies. Storage is cheap, so this may not be a big deal (but the stock

TV almost certainly does not have enough on-board storage to completely hold anyone's favorite movie collection).
Live programming is not a part of the

TV experience (yet). But there are great ways around that. The free way is to put up an antenna, which can get HD quality local channels BETTER than you can get via satt/cable. If you live near enough to a city, you can likely get ABC, CBS, NBC, FOX, PBS and an independent or three
FOR FREE. That does a good job of covering LIVE local news, live sports on those major networks, and many of the more popular weekly shows. These don't flow through

TV, so you'll need to either:
- buy another box like a TIVO to act as your "over the air" tuner and DVR
- hook the cable in from the antenna into a TV capable of tuning HD channels (and watch everything live)
- buy a device like those from elgato, so that your computer can be your tuner & DVR. Their software can capture live programming to your computer's hard drive, then convert it to a format compatible with
TV. That's the (easy) way to go if you would like to watch such stuff through
TV.
So that leaves favorite cable networks you can't get via (Free) antenna- like Fox News. If such programming is absolutely required, you'll have to buy a subscription to either cable or satt. However, one other option to explore is the vodcasts in the podcast section of the iTunes store, and the TV shows. A lot of Fox News personalities & programming is offered via video podcasts. I just went into the podcast section of iTunes and searched for "Fox News" and about 20+ vodcast/podcasts are available. You might find that a selection of these sufficiently feeds your Fox News hunger. If so, they are all free.
A lot of TV shows- from major and cable networks are available to

TV via iTunes store. These have costs per episode or season passes that seem steep. But depending on how much you pay for cable, and how many shows you really want to watch (especially if you use the antenna solution to get the shows from the major networks for free), a lot of people find it much cheaper to buy season passes of the few shows they can't get via antenna vs. paying for cable or satt. And those shows are commercial free, which is very nice.
I hope this is helpful. Only you can completely answer some of your own questions, as no one here knows the movies you like, the shows you consider "must see", etc. Spend a little time in the iTunes store searching for stuff that's important to you, and that should help you make a good decision. For those podcasts & vodcasts, yo can sample them on your computer via iTunes so you can see right now if they will do the trick for you. If major network programming is much of what you watch, the over-the-air antenna option is FREE and delivers the BEST quality signals. And pairing that with an Elgato solution or TIVO is a great way to go.