I'm a big fan of the Apple TV; not so much for what it is right now but more for what it could be. I think it's time we Apple TV users start cheering for a new upgrade.
Here's how to make the Apple TV better:
The controls on the Apple TV currently feel slow and cumbersome; things don't just "happen" when you click on them (there is often a delay). Speeding those response times up will give the regular couch potato the same feeling they get when flicking through channels. It needs to change from a "browsing" (web) paradigm to a "flicking" (TV) paradigm.
Just like the iPhone, the Apple TV is ripe with potential for mini-applications that can be downloaded and enjoyed instantly. Here are a few app ideas I like:
Games: it could be a gaming system if the games were played using your iPod touch/iPhone as a controller. Simple games, like Tetris, could use the existing Apple remote.
Boxee: come on, Apple! These guys have done all the hard work for you; allow people to install it easily.
Keynote: display slideshows on your TV
Video editing: this app allows you to create quick videos and slideshows on your TV screen
Push notification: allows on-screen alerts for calendar events, new TV episodes,
Using the iPhone or iPod touch as a touchpad and keyboard could make browsing the web on a TV screen a good experience. People are already using their iPhones to browse the net at home; expanding that experience to a bigger screen in the living room is a logical next step.
After talking to various Apple TV owners, I think Apple doesn't realize that the primary market for this device should be: families. My wife doesn't know what a torrent is and doesn't want to watch movies on the computer. She wants to sit on the couch and navigate a system that allows her to watch movies and TV: the Apple TV does that. My kids have their favorite TV shows (Shawn the Sheep and Wonder Pets are two of them). They want to watch them over and over again. When we had to rely on DVDs, the discs would get scratched beyond use after a couple of months. We buy their favorite shows on Apple TV and watch them as often as we like, and no physical media gets damaged.
Even though Apple TV is perfect for families, parental controls are terrible. The new user interface from the latest update is slick but shows scary thumbnails that can't be turned off at the top of the screen. Furthermore, while I can set parental controls for the movies and shows I own, I can't control what movie trailers my kids can access (or even turn movie trailers off at all). These things need to be fixed.
When Steve Jobs called the Apple TV a hobby, he put a nail in the coffin before the device even had a chance. Steve: there is a lot of potential to reinvent the "TV world" like you did for mobile phones and portable music players. Get off the "hobby train" and make it happen.