Once again, gaming on the Apple TV is something I'd absolutely love to see; Apple already has the app store infrastructure, all that would be required is a hardware update for the Apple TV (which it's really due already) though support for the current generation wouldn't hurt if apps can be loaded via a computer (to overcome the low capacity). A bigger capacity drive so the device can function on its own is the main hardware requirement, though of course a better GPU and a CPU bump wouldn't go amiss.
Things are pretty simple on the software side as well, as the main thing Apple needs to do is provide an API for a controller, and they could easily release a controller app that allows you to use any iOS device as an ad-hoc controller in a leu of a proper physical one (which could be left to third parties to produce). Game Centre covers things like multiplayer and achievements, so there really isn't much else that's needed.
It really is a fantastically small amount of work since the hardware is something that would presumably be upgraded anyway, and the software is mostly just an API away from being gaming ready, though there are other things I'd love to see (e.g - support for running a big version of an app on your Apple TV while running the same app as an interface on your iOS mobile device, with the ability to pick up save games and take them with you). Opening up the Apple TV would also have the side-benefit of eliminating the need for Apple to keep apps for Netflix, YouTube etc. up to date and the services can do that themselves (though I believe some may do-so already, which suggests some kind of dev kit already exists?).
The Apple TV would slot easily into the same kind of budget indie gaming space as the Ouya, except that Apple could potentially provide it with superior hardware to give it an edge. Porting apps also wouldn't be that hard as anything supporting the high-res iPad is already rendering at better than 1080p, so it's really just an issue of adapting controls to support controller style commands.
Controller awareness is something I'm dying to see anyway, as I'd love to have an adapter that can turn an iPhone/iPod Touch into a Vita style handheld, and if you could just sit down in front of an Apple TV to switch to playing on a big screen then it'd be great.
I dunno, analysts keep saying this, and Apple keeps staying silent, but it's an opportunity to add huge value to the Apple TV with a tiny amount of effort; I mean, you could hash out a controller API in about a day at which point you're most of the way there. Add Apple TV to the iTunes store, release a new model with the latest hardware and write up a simple controller app for portable iOS devices and you're done.
Do the math.
What math? You really think people want Angry Birds and the like on their TV? Casual gaming is big, but it is of no threat to console or PC gaming since it only really works out on handheld and portable devices.
I say this rumour is total rubbish personally.
Apple should just buy Nintendo. Or kidnap Miyamoto and force him to make Mario games for iOS. I don't know. I haven't thought this through. I just want Nintendo games on iOS.
What math? You really think people want Angry Birds and the like on their TV? Casual gaming is big, but it is of no threat to console or PC gaming since it only really works out on handheld and portable devices.
I say this rumour is total rubbish personally.
Are you saying that Apple is an expert in video games and smart watches? Haven't seen any products from Apple in these areas either.
Everyone- Apple, Google, MS and all the rest are trying to predict the next big thing. Not all bets will come off so they either pick and choose (and pray they have got it right) or use the shotgun approach and dip a finger in everything to be ready when the market is.
The only question mark for me is the control method - Angry Birds on a touchscreen makes sense, how you'd control it holding a controller while watching the TV would be very different.
There's no reason casual games couldn't be very lucrative on TV. Would you buy a Xbox One for 500 euros, with games in the 40-60 euro range. Or buy a 120 euro AppleTV, with games in the 90c - 10 euro range; which - if Universal - can also then be played on phone and iPad.
I think there's a big gap there that Apple can fill.

Looking at Infinity Blade, Infinity Blade II and Blades of Fury (starting to see a pattern), that I play on my iPhone, I would say that Apple has the potential to throw some great games on the AppleTV.
Biggest problem will be getting some interesting titles, I bought the xbox and xbox360 just for Halo and afterwords I bought a Playstation 2 to play the older games of SoulCalibur and Tekken.
Even if the price would increase from, $99 to $199 or $299, it would still be a bargen compared to Microsoft and Sony, ifit plays the same quality of games.
You are aware many of these causal games including angry birds are already available for today's consoles?
Finally, Apple and Google are getting into this. I'm sick of these jokers Microsoft and Sony, and Nintendo has lost most of its mojo.
I agree with your entire premise on cable providers protecting their business model, but on point 1) actually cable companies have much better margin on being an ISP/dumb pipe than their cable packages. Search The Verge's interview with Vizio's CTO Matt McRae. But yes none-the-less they do want to offer subscribers the entire package and not simply bandwidth.
Some, certainly. But tens of thousands (as on the App Store)? I don't know.
You need to play better games.