It would have to be seriously cheap. Like, $200 to $300 cheap, in order to work. And since Apple is charging $300 for the AppleTV, I'm not sure I see that happening.
If they can bring it in around $500-$600, I think it would sell.
For one thing, the Kindle from Amazon is priced at $399 and is nowhere near as capable as the device gr8ful described. Yet it seems to be doing well.
Moreover, people denigrated the IPhone because of its price. It seems to be doing well also.
The key to selling well isn't cost but value. If people are getting enough value for their money (real or perceived), they'll buy whatever it is you're selling. Apple has long recognized this.