The Achilles Heel
The biggest problem for Roku is also what contributes to its greatest strength. According to this post in the Roku forums, which contains a page from the Developer Guide, the only video formats natively supported are H.264 SD, H.264 HD (.mov and .m4v) and WMV9 SD (.wmv). Supporting only a few formats has let Roku focus on tuning performance and buffering so that problems with playback (at least with Netflix) are very rare.
But this limited support means that playing back any other formats requires transcoding to the supported formats. This puts Roku at a distinct disadvantage in the $99 streaming media box sweepstakes versus players like the WD TV Live Plus and Seagate FreeAgent Theater+. Both these players can play a wide variety of video and audio formats from either DLNA servers or by directly browsing network shares. And both now support Netflix, although with older, clunkier GUIs.
The Roku players, on the other hand, lack any built-in ability to find and play media from your local network. Playback from the USB port will help a bit, but this will only add playback for the very few formats supported.
There are a few "channels" that have appeared that add network playback. But they all require installing a server on a networked computer. Note that none of them support playback from DLNA sources.
Chaneru has server apps for Windows and MacOS (the MacOS install is a bit more involved than Windows). It supports iPhoto, slideshows with background music, playback from iTunes libraries and some Internet streams via URL link. The formats link on the Chaneru website shows only VC-1 HD format support in addition to the Roku native formats. It has a 30 day trial, after which you need to pay a one time $10 fee.
Gabby is another Roku media server but supports Windows only. The current beta requires Windows Installer 3.1, .NET Framework 3.5 SP1 and SQL Server Compact 3.5. It seems less far along than Chaneru (at least judging from its barebones website), but has "experimental" transcoding support for some video formats. At least for now, it's free.
Roksbox is an app that perhaps only the geekiest can love (or use). It requires that you install a webserver, organize your photo, music and video files (by creating XML files) and convert their formats to play them. Its main advantage is that it's free.
I haven't yet tested any of these apps, mainly because it's a lot easier to use the WD or Seagate players mentioned earlier that I already have on my network.
I'm a fan of Roku's players primarily because they provide a trouble-free "lean-back" experience for playing Netflix streaming content. They have a high WAF in my household and are one of the few entertainment devices (aside from our DirecTV DVR whose days are limited and the iPad whose screen is too small) that Ms. SmallNetBuilder can use easily and without requiring tech support.
I think Roku's move to push its price point as low as possible ($60) is a smart move, given its limitations as a general digital media playback device. Roku players are first and foremost Internet-connected playback devices and are pretty much useless without an Internet connection. As such, it's no biggie that the entry-level HD model supports only 720p HD, since there is precious little 1080p being streamed for the foreseeable future.
If you already have a Roku box, there's really no need to trade up to any of the new models. But if you mainly want to trade up from watching Netflix on your laptop to the comfort of your sofa and living room TV, then any of the Roku players will serve you well.