Seth Weintraub, writing in a Computerworld blog, had this to say about Apple TV: "My theory is that Apple has had all of their best talent in the past two years working round the clock on the Tablet - so the AppleTV gets neglected."
It's as good a theory as any, although I do have another to offer, which is that Apple has been waiting on the availability of the right components at the right price to allow them to do what they want to do with Apple TV, while still offering it at a price appropriate to a discretionary home entertainment component, without losing money on each unit sold. The right components might include something significant designed in-house, and it is rather likely that Apple's chip design people are already otherwise occupied with higher priority projects.
Apple TV is currently mainly an appliance for renting/buying and displaying video from the iTunes Store. As such it has still proven modestly popular, with a few million units having been sold. That's without 1080p, without being usable as a DVR or the inclusion of a tuner, and without the sort of graphics hardware that would make it a game machine in the same league with Sony's PS3 or Microsoft's Xbox. Apple could add any or all of these capabilities. If they were to add all, and keep the price in the same range as the original machine, they would have a far more compelling product that would likely fly off the shelves.
But Apple doesn't develop products without consideration for how they fit into their overall product line, and there are most likely components of that puzzle you and I haven't yet seen, such as the aforementioned tablet.