We moved last December and faced a similar situation... $120/month + tax for digital cable with no HD, or a $220 deposit + $80/month + tax for satellite. I found neither to be acceptable.
We looked into Apple TV but instead bought an Acer Aspire Revo 3610 to use as an HTPC. Dual core Atom, ION graphics, Wireless N, 250 GB HD, 6 USB ports, wireless keyboard and mouse, and HDMI out for $325 shipped. Now we watch shows from network sites, Hulu, Netflix, whatever and it looks better than the neighbors' cable and satellite. Only 9 months into things and that one time HTPC purchase + $9/month for Netflix has cost half of what the other options would have and provided us with better content and better quality...
We looked into Apple TV but instead bought an Acer Aspire Revo 3610 to use as an HTPC. Dual core Atom, ION graphics, Wireless N, 250 GB HD, 6 USB ports, wireless keyboard and mouse, and HDMI out for $325 shipped. Now we watch shows from network sites, Hulu, Netflix, whatever and it looks better than the neighbors' cable and satellite. Only 9 months into things and that one time HTPC purchase + $9/month for Netflix has cost half of what the other options would have and provided us with better content and better quality...