Such a device exists

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You're looking for a media box. Popular brands are Apple TV, WDTV, Boxee, Patriot Box and Asus O! Play. Check out the reviews and see what features you need.

I have had an Asus for a couple of years. Add a 2.5 inch hard drive or a flash stick and you can watch your AVIs, XVIDs, MKVs, blue-ray rips plus anything you can find on the net - also supports eSATA. Has component, HDMI, optical out. Has not failed on any format I've tried. These are as cheap as $50 on sale.

If you're interested in Apple TV do some research to see if it will do what you want. DRM makes iTunes, Hulu, Netflix pretty restrictive for a lot of people.