This may end up being claim chowder and all, but it makes perfect sense.
I love my Apple TV, but it’s getting a bit dated. A small box that spits out 1080p video and runs iPhone OS & app store apps is going to be really compelling, especially at the rumored $99 price tag.
My biggest question is whether or not the iPhone OS can work sufficiently without a touch interface: the Apple stance on remote controls has always been a four-way pad, a play button, and a menu button. Apple TV-specific apps probably wouldn’t pose much of a challenge, but running a more traditional iPad app on your TV would translate a bit more crudely.