I think the whole thing is a nice try but it's too niche. I think a far better experience could be had by a combination of a server, HTPC, Wireless keyboard and iPod Touch.
The 16GB HDD is anemic. You would effectively be streaming the video from the source (your server) to your "keyboard" then to the TV. A lot of wasted bandwidth that could easily be recovered by a couple of dedicated wires.

My wireless keyboard takes two AA batteries and lasts approximately 4 months as opposed to this thing which lasts a mere four hours. Granted my wireless keyboard is a bit old and the wireless component has a couple of warts. But geez, the battery life murders this thing.

Lastly any decent server running LAMP (or some other custom suite for this purpose), a bit of trickery with routing addresses and a bit of code and your iPod Touch (or any other web accessible device) becomes your HTPC remote. Even control your movies from anywhere in the house.

Yeah... this thing is just too niche. It's nice to have an option when building your home entertainment center, but there are far better, more flexible and more powerful designs out there.