From what I understand (and I could be very wrong here) the biggest issue here is simply the amount of memory that is required in order to keep a copy of the current frame from a HDMI signal, and the fact that to modify anything in the HDMI signal, you need to decrypt (if watching a HDCP protected stream), decode each frame, and then finally re-encrypt the HDMI signal.

I was looking into what would be necessary to build a HDMI switch that allowed for seamless switching of video between different inputs, and basically there was no hardware for it. The closest chips that I could find was Analog Devices' ADV7626 and Lattice's SiI9777S.

Lattice CP9777 might be worth having a look at if you can understand anything about the datasheet :)