On my 52", iTunes and Netflix HD is tolerable and about as good as OTA HD broadcasts.I don't agree that iTunes 1080p video is crap when compared to blu-ray. I own both formats and I love the visual improvement in the 1080p content on iTunes over 720p. For me though, the major noticeable difference in quality is in the audio department. You get 7.1 DTS-MA on blu-ray over DVD quality Dolby Digital 5.1 on iTunes. That said, still doesn't bother me though. I still prefer getting my content digitally and the content is "good enough" for me.
Anyway, I do agree that blu-ray will never show up on a Mac. Ever.
On my 117", the compression used on iTunes 1080p and Netflix HD is no where close the blu-ray PQ. The banding and macroblocking is very apparent.
The closest thing they have for streaming that is acceptable HD on my 117" is VuDu HDx.