I said a combo of the two, like I said there are some companies offer similar devices with Linux/MythTv. When you consider the emphasis Apple puts on entertainment features of their products it seems like a good fit.
I think you're close, but you neglected to consider it from the company's perspective. It's all about sales and profit. From the moment the concept of the Apple TV came out, me and many other people said it would make more sense to spend a little more and just buy a mini than an Apple TV devise.
Well, it looks like that trend may be true. Maybe mini sales are cutting into Apple TV sales, and Apple makes more money off the little underpowered Apple TV than the compact Mini powerhouse. If that's true, guess who gets the axe? Especially considering you have choice of content vendors with the Mini (store-bought CDs and DVDs), but with Apple TV you're tied to iTunes media.
I believe it's the same reason Apple isn't, and may never, come out with a video iPod that is the same as the iPhone, but without the phone and other features. Look at how many people have said they don't really want the phone, just the iPod with the big screen. There's no way they'll release a product that will basically kill sales of the iPhone.
It would be a shame to lose the Mini. I have been planning to buy one for an entertainment center devise, but I've been waiting for an update.