I turned my old iPad into the ultimate digital picture frame
kickstarter.com
kickstarter.com
The difference seems to be the one I have is easier to load/unload (just slides in/out), not matted but has a thicker border, and uses an acrylic peg or two to stand it up instead of the wood piece. Also, it doesn't look like the iFrame can be in portrait mode, and the one I have didn't come with a wall wart.
Oh, and this one has a tiny brass peg that presses the home button for you, if you ever need to hit it. And it's a bit more expensive - I never actually saw the price until now.
I think I prefer the style with the matting, but I think, in the end, I'd prefer the ease of use (no clips) of the one I have.
So, have the app connect to the iFrame server. Find out the internal IP(sent via query, idk) then start the server. Give the user a webspace(iframe.com/username). Now the user can log into their frame remotely and view their camera, change photos, upload content, ssh, whatever AND you could still sell the app. Still not worth a couple $100, but there needs to be some more value added here I think.