You are correct. It's generally used for illegal purposes. I'd like to think there's some grey area. If I pay for cable, and have access to Hulu, can I torrent a copy of House too? Probably not since the rip is stripped of advertising. And there is legal video distributed via BitTorrent. Yadda yadda yadda.

It's just a given that many people want a TV device that can acquire and play video from anywhere and in any format. Bittorrent would be a killer feature for me personally, that is all.

If AppleTV doesn't do this, the adoption rate will be lower. I think it's safe to say that AppleTV hasn't been a runaway success to date with the iTunes Store as the only source. The video sharing stuff in the new AppleTV indicates that Apple wants to open it up to more options. The question is how much farther can it go via 3rd party apps and it's exciting to think about.

But Roku or Boxee, as others have suggested, look a lot more attractive in their openness and integrated sources right now. A theoretically hackable Google/Android device seems quite tantalizing too. A fast VLC on the AppleTV sounds like a killer device just begging to download content too.