If I knew that Apple was going to abandon the Apple TV I'd buy the 160GB model tomorrow (and hope that they did the right thing and sort out some of the bugs).
However, I absolutely love the Apple TV despite the severe problems I have with mine (I have to restart mine almost on a daily basis because it's so unreliable). If Apple brings out a new model I'll be very keen to upgrade.
Knowing whether to buy now or not is a difficult one. If you buy the 160GB model and would be 1) upset if a new model comes out and 2) unable to afford to upgrade to a newer model, then I would say wait. If you wouldn't mind not having the latest model, or could afford to buy a new model despite having recently bought the old model, then I'd say go ahead and buy now.
I think the Apple TV is worth the money just for it's movie rental functionality. I have opted against buying a blue-ray player and discs, or subscribing to movie channels with my satellite TV company, and we just choose movies on the Apple TV. The Apple TV has also become my main 'source' for my hifi for listening to music. I have lots of children's TV programs too which gives me the ability to limit what type of program they watch, and I can avoid them watching advertising.
The Apple TV is excellent - but does still have lots of problems, and could be even better.