I've only just got mine, but yes, I'm using as a desktop computer.
I don't see a problem with the screen size...didn't they all used to be this small!? Turn off the lights and put on CSS and it's cool.
I also have watched some movies, it's fine, just don't think about what other things could be like and it's OK!
I did want an iMac, but then I thought I will need a bit of portability at some point, not much, just in case. In the future I can see myself getting a decent monitor, the only thing that put me off doing that was how it would all look in comparison to an iMac (sexy). But thinking about it, the ACD, wireless keyboard and mouse on a desk would look even better, all I add at the time of use is the MBP, which would be folded up to one side.