I'd been planning to do the whole HTPC thing with a Mac Mini in January '08. The Apple TV seemed attractive, but it won't work for me based on the given video specs:

* H.264 and protected H.264 (from iTunes Store): Up to 5 Mbps, Progressive Main Profile (CAVLC) with AAC-LC audio up to 160 Kbps (maximum resolution: 1280 by 720 pixels at 24 fps, 960 by 540 pixels at 30 fps)
* iTunes Store purchased video: 320 by 240 pixels or 640 by 480 pixels
* MPEG-4: Up to 3 Mbps, Simple Profile with AAC-LC audio up to 160 Kbps (maximum resolution: 720 by 432 pixels at 30 fps)

Without MPEG-2, you can't play ripped DVD images or recorded OTA HDTV signals. Also, the 40GB hard drive seems uselessly small, although I suppose you can just use it in streaming mode.

Amusing question: will FrontRow, on a regular Mac, be upgraded to have all the UI features present in the Apple TV?