I have been searching so please don't beat me up! 
I have no TV service and I don't plan on subscribing any time soon but we do watch some DVD's on our old TV with a DVD player. My kids like to rent movies or TV shows (like Phineas and Ferb or Cars 2 etc.) from iTunes and watch them on my 13" MacBook.
I watch Dexter, Mad Men and a few other current shows from DVD. I have never seen a High Def TV or watched Blu Ray.
We have no Video Game system (yet) but in a year or two when my kids are about 10, I'm sure they'll really want one. We are a very out door oriented family and don't spend any time with video games or watching a lot of TV but we do enjoy it and it's time for an upgrade.
So to bring us up to the 21st Century: I'm thinking ATV2 with either thisLG 42" LED (will it even work with ATV?) or this LG 32" 720p 60Hz.
I plan to subscribe to Netflix so we can get streaming movies and TV shows and I watch some things on Hulu. We don't watch sports at all. Maybe the kids will in the future, I don't know.
Any recommendations for me? So ATV, LED, and netflix subscription, iTunes rentals should bring our technology up to date?
Anything I'm forgetting or not aware of?
Is a blue ray player something I should look into? I've seen them on Amazon and was curious. The kids get a few DVD's a year usually. The rest we rent.
Thank you for listening to my sad story!

I have no TV service and I don't plan on subscribing any time soon but we do watch some DVD's on our old TV with a DVD player. My kids like to rent movies or TV shows (like Phineas and Ferb or Cars 2 etc.) from iTunes and watch them on my 13" MacBook.
I watch Dexter, Mad Men and a few other current shows from DVD. I have never seen a High Def TV or watched Blu Ray.
We have no Video Game system (yet) but in a year or two when my kids are about 10, I'm sure they'll really want one. We are a very out door oriented family and don't spend any time with video games or watching a lot of TV but we do enjoy it and it's time for an upgrade.
So to bring us up to the 21st Century: I'm thinking ATV2 with either thisLG 42" LED (will it even work with ATV?) or this LG 32" 720p 60Hz.
I plan to subscribe to Netflix so we can get streaming movies and TV shows and I watch some things on Hulu. We don't watch sports at all. Maybe the kids will in the future, I don't know.
Any recommendations for me? So ATV, LED, and netflix subscription, iTunes rentals should bring our technology up to date?
Anything I'm forgetting or not aware of?
Is a blue ray player something I should look into? I've seen them on Amazon and was curious. The kids get a few DVD's a year usually. The rest we rent.
Thank you for listening to my sad story!
As an Amazon Associate, MacRumors earns a commission from qualifying purchases made through links in this post.