I've always thought that the Apple TV would greatly benefit from third party plugins (official ones, I mean, not hacks), if not full blown apps. Take, for example, the YouTube functionality. Wouldn't it be cool if you could watch videos from Viddler, Vimeo, or any of the other countless video sharing sites, in addition to those on YouTube? And let's not forget Netflix. Microsoft and Netflix have teamed up to offer the 'Watch it now' library of videos to XBox Live Gold members. Being able to watch those videos from Netflix on my Apple TV would make me one happy panda.
Hansell notes that to make apps on the Apple TV viable something has to be done about that horrible onscreen keyboard. He thinks that Apple might tie the iPhone into the Apple TV as a way to control it. Luckily, Apple has already done this. As John Gruber points out, when you have Apple's Remote app on your iPhone you are able to use the iPhone to enter text into your Apple TV.
Let's hope Apple stops thinking about Apple TV as a hobby and starts making an aggressive push for the living room. I like my Apple TV, but my XBox 360 offers up more functionality (and more heat!).