I'm skeptical that they can convince regular people to put PC hardware in their living rooms. Microsoft and manufacturers made a ton of effort in this direction last decade, and it wasn't half bad: Windows Media Center was a pretty decent user interface for TV-watching, and lots of "living room PC" form factors popped up (remember the ubiquitous Shuttle case?). But nobody cares. It was just too weird and clunky for the average consumer to put OEM PC hardware in his AV stack. Hard core geeks will do it, but that's not a big enough audience. Maybe that's changed enough to make this work, but I kind of doubt it.
AppleTV sells reasonably well, and GoogleTV would probably be thriving right now if the major networks didn't discriminate against its UA. I don't follow gaming that closely, but I believe most of the consoles released since the Dreamcast use a variant of the PowerPC chip that used to power Apple's computers.
Silicon is silicon; it's the UI that makes a difference. People have been paying money to have gaming systems in their homes since the 80s, and entertainment-center computers have been popular since TiVo in the 00s.
Moreover, these manufacturers are all working on "smart TVs," which is what has been keeping GoogleTV alive in spite of the entertainment industry's hostility towards it. With the right UI and licensing, I could see an LG or a Samung (or a Vizio for that matter) releasing a SteamOS-powered TV.
Microsoft had trouble getting people to run Windows in their living room. They had no trouble getting millions to put PC hardware in their living room as evidenced by the XBOX.
Calling the XBox "PC hardware" is really picking nits and missing the point, in my opinion. The problem with PC hardware in the living room is that no matter how you dress up an HTPC to resemble a piece of consumer electronics, it's all cosmetic, and it's still a PC in that it's not a fixed hardware configuration like a console. This makes the software more complicated, adds driver issues, support costs, hardware reliability is unknown, etc. The result is a tradeoff in how polished the product can ever really be. Geeks will put up with it. Regular folks probably won't. Again, my opinion.
This is alot closer to an xbox than a pc. Value just doing it via slightly different (and smarter) process. This is still aimed squarely at the gaming market it's just a bigger pass at it.
