It looks to me from the demo -- which is excellent by the way and shows Google is not messing around, but that also everyone is not saying yes (no surprise there, overall they are getting 3rd party traction) -- that the device is explicitly not a video/media streamer.
The only mention of anything "yours" is photos and for all we know, those need to be Picasa-ed.
Now, here comes the but.... The device is obviously extensible via the Android apps platform. I think we can agree that one can port VLC to the GoogleTV. It's been ported to iPhone and presumably GoogleTV has similar processing power / RAM, while it doubtless has enough graphics horsepower.
So, will someone produce a VLC (or equivalent) that streams your .mkvs or .isos to your TV? Keeping in mind they might also have to provide the software to read off a network share -- which is something GoogleTV probably does not do at this point -- it's not entirely a given. Is it likely? Well, perhaps.
But I think it's important to realize something: This is not a device to stream your media. It's a device to stream their media in ways that are convenient to you. It's conceived of along similar lines to AppleTV, but with bigger plans, more content (at least currently, time will tell), and its really about the Android ecosystem. Someone consuming media on their Android phone will love this the way someone with an iPad will learn to love AirPlay.
I can't help but wonder why Apple TV doesn't already have "channels" composed on some of these same web sites, Pandora, etc. Did Apple announce this before it was fully baked because they knew Google was coming and wanted to steal some thunder? Is the theory that $99 is so cheap it opens up a universe of possibilities that the Logitech offerings will not?
GoogleTV built in is obviously very powerful, but will probably not have much more than low-single-digits of the market for years (think about the speed at which TVs are replaced and understand that in the short run virtually no TVs will have it, and even over time they might not get much beyond a small portion of the replacement market). So the box is really important. And at $299, the box is really expensive if, say, your primary goal is streaming Netflix, having a basic rental box, etc.
Nevertheless, I find the recent demo 100x better at explaining the box than all the previous kerfuffle. And I'm much more interested in seeing what Logitech shows off than I was a week ago.
There is no difference in HDMI cables. If you can see the picture without visible dropouts or sparklies, the cable is working at 100%. No other cable will display a better version of that picture. You're simply wrong if you think there is a better digital cable than one that is already working.