I would've said the same thing about the iPod (too too expensive), but Apple's got style. People tend to be more stylish than us geeks.
The tiny PCs aren't fast, but that's fine. The Nanode I was looking at for a (way in the future) PVR probably is also going to run at 1Ghz. Here's the kicker, though, the Nano-ITX and Mini-ITX boards have built in hardware for the tough stuff - like MPEG decoding. And 1Ghz = fanless design. This makes it perfect for PVRs, car radios, and other media applications. I'm sure Apple has a similar design where hard stuff like MPEG is hardware.
Apple's the first one bringing the Mini-ITX / Nano-ITX concept with style and flair. Plus, their built in apps are cool. Aside from web browsing and junk like that, that iLife suite means you get a built in music player, 8-track studio recorder (if Apple has a good USB multi-soundcard, this is a killer for us beginning musicians ), play DVDs, edit HD video, etc. Granted the apps look basic compared to pro stuff but many people don't need more than basic.
No built-in PVR, though. That would've made me consider the Apple too.