The Roku does play local content - though only on their $100 box, and only via an attached USB drive. I'd prefer it to have the option of doing this from a network share, there is a paid for ($15) add on channel that can stream from a webserver - again not an ideal solution, as it is third party, but an option.
So to correct Bruno Roku does do local content. Personally I don't have a great need for local streaming, I never purchased a significant number of DVDs, or downloaded torrents.

From a UI point of view I gather the Roku has the WDTV and the like beat. I've not used a WDTV, but I've seen complaints about it's sluggishness.
We've had out Roku for 2.5 years, so yeah I am biased. The UI and remote is simple enough for my 3.3 yr old daughter to select the next episode when her cartoon finished - yeah this is both good and bad
This weekend we brought it with us to the in-laws, it plugged right in and Just Worked. Later they wanted to watch "The Social Network" but where having issues with Comcast On Demand - it only took a few minutes to register our Roku with our amazon account and to search for the movie, $4.99 in HD (don't know if this was 720 or 1080).

How does Amazon's Video on Demand compare with Vudu for content and pricing? I think this is a fair comparison than comparing Vudu, per movie, with Netflix, all you can eat streaming (assuming you can find something you like...), due to the different pricing models.