The article says the project has been in the works for a long time, and the projected price being tossed around is US$99.00! That's a pretty competitive price, but the devil will be in the details. If it's just a vessel to buy from the iTunes store, it doesn't seem a very exciting product.
On the other hand, it it connects to Netflix, as the iPad already does, the whole idea gets a lot sexier. It also will need the content the current Apple TV has, like YouTube, MobileMe integration, podcasts and more. If they add services like Pandora, MLB TV, NBA games and more then they might really be cooking.
Roku already has a $99 Netflix box with some additional streaming services, but if Apple allowed iPad/iPhone apps to be scaled up for TV viewing the whole concept gets really, really interesting.
An iPad, iPhone, or iPod touch would also make a great remote, eh? From the Engadget post, it doesn't sound like this new tricked out Apple TV is coming along any time soon, but it should shake up the market with Google announcing a set top box and TV integration, and Microsoft, which might have something up its sleeve besides Media Center.
As we've said before, the current Apple TV is fast becoming irrelevant, and it needs to be more than a 'hobby' for Apple. Will this rumored new device do the trick for you?