I finally have a setup that is sustainable for both me and my wife. We test-drove it for a few months, and then finally cancelled our Dish Network subscription.
Here's what we do:
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Locals in HD:
we have an OTA antenna AND clear QAM cable from our internet cable provider. The OTA (we're in Los Angeles) is a good signal, and we get all the broadcast networks and PBS in both SD and HD. The clear QAM is the unencrypted stuff you get when you plug your co-axial cable into your TV and scan for channels. We are with Time Warner Cable and only pay them for internet, but they are required by law to provide you your local TV via the co-ax even if you don't pay them for it (as long as you are paying them for high-speed internet). They also have Discovery HD and AMC on there, so that's nice. If you are getting your high-speed internet from a cable company and are not paying for TV service, just try plugging your co-ax into your TV and scanning for channels. You'll probably be pleasantly surprised with the free content available.
Anyway, the OTA or clear QAM co-ax goes to an HD Homerun device, which is a dual-tuner device that connects to your router via ethernet cable and sends the TV signals out over your home network. Then I run EyeTV software on my macbook pro, which picks up the signal from the HD Homerun, and records the shows I tell it to (EyeTV + Mac = DVR), and auto-exports them to iTunes after recording. Then I just watch the recorded shows on my Apple TV2's, served from iTunes on my mac. This covers ~80% of what we watch, and has no monthly fee. . . just the upfront cost of the HD Homerun and EyeTV software ($179 for both from elgato), and the cost of the Apple TV's ($85 each refurbished from apple.com). You can expand it to any TV in your house by just buying another Apple TV; and those are wireless so it's very easy.
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For cable content:
We like the Daily Show and my wife likes Project Runway. We could buy these on iTunes and watch them on the ATV, but that could get expensive (especially for the DailyShow, since it has so many episodes). So instead I jailbroke my ATV2, installed XBMC, installed the bluecop repository which includes the "Hulu" and "FreeCable" plugins which scrape TV shows from the websites and display them in 480p on the Apple TV. So we can watch those shows for free, with no commercials, on our big-screen TV.
All this took a while for me to figure out what worked best, and how to jailbreak the ATV, etc. But now that it is set up it works great and there is no real maintenance involved as long as you don't auto-update your apple TV firmware.
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Regarding Dish Network:
You might want to look into their "welcome pack", as was mentioned by another commenter. That's the service I had with them: $15 for the welcome pack and $6/month for the DVR rental. $21/month really isn't that bad. I have no big complaints about Dish, but after I got my own system set up, I figured why keep paying even that $21/month. The only stuff we got on Dish that we don't easily get now are current episodes of Food Network shows like Barefoot Contessa. My wife likes that show, and there is a very old season available on iTunes, but otherwise I have searched high and low and you just can't get that particular content on the web.