You describe a Mac Mini. Quiet, small, inexpensive and not fugly!
http://hicksdesign.co.uk/tag/mediacentre/
He seems to finally settle with beaming media to his PS3 via DNLA and buying an AppleTV to achieve his aims.
Key quote on the Mac Mini:
When it works, it’s great. The trouble is that 15% of the time something happens – EyeTV crashes, iTunes has been updated and won’t let you play anything until you’ve accepted terms and conditions, or another app is telling you that an update is available.
For these times, I don’t have an easy solution, other than to screen share and sort it out with the MacBook. Sometimes (like in the instance of EyeTV crashing) you just have to restart.
There's few good answers in this space at the moment. I've got an Acer Revo running Ubuntu and XBMC that's doing great for me but it required me to climb a major learning hump to get it all into shape. I didn't mind that, in fact I enjoyed it, but there's few good, easy options for non-geeks, or even geeks with less time to spend. There are lots of mediocre options but they're all flawed in a variety of ways.
The new media management features in the upcoming Plex/Nine release look great: http://vimeo.com/11880867
The Apple Bluetooth keyboard is small enough to be living room friendly.
Overall, a Mac mini isn't quite as simple as AppleTV, but it's far more functional.
If a boxee box does the job for $200, has 1080p, 7.1 out, 802.11n / Gig.E why bother spending $600?
I hope the Logitech setup GoogleTv box does the job.
It's always on, so it's a great home storage server (I have a Drobo w/ 4.5TB of storage attached via FireWire 800).
It downloads torrents & podcasts nicely.
Also, the shared library support coming in Plex/Nine looks killer. I'm looking forward to running Plex on my MacBook without having to maintain a separate metadata library.
Overall my Mac Mini connected to my LCD TV using a wireless mouse and keyboard (gyration handheld mouse) suits me via Firefox.
Oh, $600 for the mac mini vs $200 for something like the Boxee box / Logitech control box (hopefully $200)
All said and done, Mini is not the ideal box for the consumer, geeks can get it to work, but most people can't.
DD/DTS 5.1 is a limitation of Toslink. If you want 7.1 or the newer lossless codecs, that requires HDMI or an conversion to multichannel analog audio on the device (some HD-DVD players did this, back when that was still a thing :)