While the geek crowd would cheer, it would still be at a pricepoint where consumers would roll their eyes at the device. Consumers make up more of the buying numbers of devices than the geek crowd ever will. Apple isn't dumb here and putting a $99 device that competes well with other $99 devices like Roku will put Apple ahead. Or did you miss where everyone is laughing at BoxeeBox right now, primarily because of price despite doing all that you said above?
Well, like I said, if PRICE is the ONLY reason Apple TV V1.0 failed, then this new one will be a massive success. But I can almost guarantee it will fail nearly as badly as the first generation because it does NOT solve ANY of the shortcomings of generation one. It also lacks component and analog outputs (some people were put off by the lack of compatability with pre-HD televisions the first time around. My receiver and switching does not handle HDMI, so I cannot use the new ATV without buying a new receiver or switcher). They have really cheaped out to get the price down.
Secondly, if you look at what this device is designed to do versus what most people used the first generation Apple TV to do (i.e. rentals versus an archive library setup), there's a big disparity. While you could still do that with the new model, relatively few people are actually going to do all that work (i.e. convert large DVD and/or Blu-Ray collections to stream to their ATV box). That's EXACTLY what I do with the first generation Apple TV and it took me a year to scan and clean up all my photos and convert hundreds of DVDs to M4V. The only way an average person would do the latter is if the system automatically did it while watching a movie. That will never happen, it seems. So the box for MOST people is pretty much what Apple intends it to be...a cheap "rental" box for iTunes movies and now Netflix movies. Well, that didn't work for the 1st generation ATV either. Most people just cried that it couldn't do 1080p and so they rent or buy Blu-Rays instead and screw Apple TV for sucking so hard. Whether actually true or not (I liked the 720p rental quality, personally, but I think the price is a bit high compared to Netflix or Red Box rentals) doesn't matter. If people perceive that a 720p rental at $4.99 sucks, then it sucks. Good luck selling even a $99 device to do something most people don't want.
Now if you figure that an Airport Express is $110, then the Apple TV is a really good deal just as a music receiver even (although with the lack of analog out, pretty useless unless you have at least a receiver with toslink in). But like I said, that assumes someone is setting up a whole house audio system. Apple doesn't really push even the Airport Express very hard for that function, even though it's designed to do it and Remote automates it. You STILL have to leave a computer on running iTunes since they REFUSE to support NAS and UPnP.
Some of the early rumors said 16 gb of flash storage in the AppleTv. I am guessing 8gb...the Ipod Touch starts at 8 Gb...which is stupid they should have started it at 16GB...maybe they ran out of 16GB because they are going to use those in the Apple TV and the Iphone 4.
I dunno. The 8GB iPod Touch is $199. This device costs half that. I don't know how big a drive they could fit for a total price of $99, but maybe their costs are obscenely low given the bulk they buy?