Given that they've already developed all of the software for it, they'd have to remove hardware to lower the cost.

It does record analog signals. They might be able to strip out that encoding hardware and save a few bucks. I'm not sure how many cable channels are still analog, though, and how much impact that would have.

They could remove the ethernet hardware, but I can't imagine that's more than about $10.

Maybe get rid of the CableCARD stuff? That's new enough that the hardware might still be expensive. Of course, that means that it would have to control a box, and that would mean adding an HDMI input.

Oh, it would also be nice if it played XviD files. You can supposedly share video files from your PC (I haven't tried it yet -- it might be another thing that's not supported on the Series 3 yet), but it only supports MPEG-4 and WMV and Quicktime or some such.