Pro Logic II sound quality is not that bad. I'd rather they use file size on improving image quality instead of on slightly better surround audio.
I don't think TV shows look as sharp as the existing resolution would allow, so going to HD is not necessary, yet. A slightly less compressed video at the same resolution could be a better compromise. Apple can make the shows or movies have more resolution without actually improving image quality, but that would only satisfy the numbers geeks.
I think movie rentals at a reasonable price would be the best new feature. It seems $5 is about the going rate for video on demand, either for cable or web based services. That would make it competitive with store based rentals, but still too expensive compared to Netflix or Blockbuster's DVDs-in-the-mail subscription service. If it is $5, I could use it as an impulse rental every now and then, but it would be too expensive to switch from my subscription to Apple's service. Sort of like $2 TV shows. I may buy once in a while when my VCR malfunctions, but not on a regular basis.