[Timothee]

A couch potato would design something like a cross between the current Apple TV and the Wii or something. Streaming content + downloadable music/movies + casual games all running iOS. Make the Apple TV interface with the iPod Touch, iPhone, or Wiimote and you're basically there.

Note that Apple is going that way with AirPlay Mirroring. As a reminder, AirPlay Mirroring allows you to wirelessly use the AppleTV as a second display for any app that supports it. (and it's very easy for a developer to support) In particular, that includes games (see Real Racing HD for example). Though it will only work with the iPad2 at first, this has a lot of potential.

I'm not sure that this would be the ideal way to get into people's living-rooms (they would still need to buy an AppleTV on top of an iPad), but it's pretty close to what you're describing.