The iTV would go completely out of Apple's comfort zone. People simply don't upgrade their tvs every time a new model comes out - they usually get 3-5 years of use out of them before they get a new one, and then only because it dies. It totally cuts across Apple's grain.
Also the initial capital to get the ball rolling for production would be pretty astronomical I would think.
Apple would be asking an awful lot of the consumer to put out 5000.00+ on a tv, cause you know they ain't gonna be cheap.
And lastly, like someone else said, a tv is not an interactive device. To make it one would result in failure. My Panasonic is internet capable, but I never use it in that way - the only thing I have it connected to the net for is firmware updates.