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The PS3 is not that expensive and is a great Blu ray and upconverting DVD player.

I feel the need to point out that Sony loses money on each PS3 because it's so expensive to produce. Apple would not be able to produce a similar product at that price because Apple relies on hardware margins (not software, which is where Sony expects to make up its cash).
 
Sony is currently making money on the PS3 (they have been since pre-december). However, the drive in the PS3 will never fit the slim iMac form. The current slim "blu-ray" drives are $900. That price will need to reduce by atleast 80% in order for apple to make it an option. Thats atleast 1 years until its viable for an iMac, by which point apple hopes to have itunes movies established. I imagine by next fall we'll see improved 720p quality along with 1080p download options from itunes (longer download times, but higher quality)
 
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