Having disassembled a mid-2010 Mac Mini, the main limiting factor right now is without question the optical drive. The space required for an optical disk drastically increases its footprint. Replacing a 2.5" disk with a mini-PCIE SSD a la the MacBook Air would also free up valuable space.
They certainly could get the computer to within spitting distance of the new Apple TV, if it lost the optical drive.
Overall, I can't discount the current Mini's usefulness. With a Seagate Momentus XT and 8GB of memory it's a great development box (spinning up 4GB VMs with ease), great every day machine, and even plays games decently enough (including Starcraft II). Power consumption with a 23" display and external FW800 disk rounds out to 45-60W depending on the display's brightness.
However, the real "zero footprint" Mac is still the iMac. With the Mini, I still need a display, and the requisite display cable and second power cable.