Not because of that. iTunes exists to make Apple’s hardware attractive, not the other way around. (Same with the App Store.) It’s pocket change for Apple. Just look at their quarterly reports to see what they are actually making money with.
They might want to keep the box around for the same reason there is a Mac mini (or they are still selling the iPhone 3GS and the iPad 2): To offer a low-priced entry point. They might also kill it because it clutters their product line. Or because it would be too cheap compared to a full-blown TV and everyone might just go with it instead of the TV.
Perhaps. But I think you have the economics backwards. Apple has said before that they break even from iTunes. iTunes exists as a low cost way for them to sell more devices.
Apple has a history of simple product lines. Supposing apple did release a tv, how would it make any sense to have a product called "AppleTV" that isn't a tv? Maybe you're right, but I stand by my own estimation.
No, they can't kill off the AppleTV with it's current form factor. They can create a TV, but the current form factor (headless) will remain. If they did, the Apple TV initiative would fail.
And I'll explain why. Just like Apple had to support Windows with their product lines, an Apple TV has to support other TVs. People like to forget that the first iPod didn't support Windows. Also consider that AppleTVs do their part in helping to sell devices. Right now, it's $99 to buy a device to extend the usefulness of my other devices. If we turn that around and I had to spend $2000 for a full blown TV just to put pictures up there? Yeah, not going to happen.
Can they release a TV? Of course! Will they rid themselves of the Apple TV as it stands? No.
On a side note:
> Apple has said before that they break even from iTunes. iTunes exists as a low cost way for them to sell more devices.
Yes. And remove iTunes from the picture and the whole ecosystem there, and see how many iPhones or iPods they sell. People buy these devices because of iTunes.
It could be the analogue of the Mac Mini compared to the iMac, it would fill a niche for those that want the Apple TV experience but already have a new fancy screen. So maybe the full TV would take over the AppleTV name and the little box would be dubbed the "AppleTV Nano". I bet it could sell well as an entry-level option if there are a range of products (and of course apps) in the ecosystem. As it is now it is an oddity.
The current Apple TV exists as a low cost way of encouraging people to buy movies from iTunes. There's no way they'd get rid of that.