And if you went up to someone with a PS3 or 360 and showed them how to use it as a media extender, not one of those people would buy a Apple TV. Especially with Netflix integration in the 360.
Exactly its not a plug n play operation. as long as you need to go through this faff http://www.microsoft.com/windowsxp/mediacenter/extender/setup/default.mspx
Or find a reliable DLNA server for PS3 and a good supply of video files that PS3 borks on for no apparent reason.
AppleTV may be a walled garden in that you can only use certain codecs. At least their implementation is consistent, reliable and simple to setup.
Their remote is naff and like all the rest they need more and compelling content, but the hope is that Apple is working on both these problems.
Certainly the number of AppleTV patents filed in the last two years would seem to imply its not dead yet.