First off this looks cool
http://www.engadget.com/2006/09/12/hands-on-with-the-apple-itv-prototype/
Questions though...
Looks cool and simple but is there anything as small out there now that does this as for me this looks really nice and better then having a media pc at your tv and a normal beefy pc somewhere as well, you can have you big pc and use that and just be connected.
Settings and resolution - hope its decent enough
Formats - I hope the sort this, Itunes 7 currently wont import all sorts of videos, music you can have others play but seems video is just silly apple formatl I hope this does not stay that way and allows for other formats.
Hackable - Im sure somone will crack it and have some form of own interface running or something so that perhaps you can do all files, different interface look etc.