It would mean apple could infiltrate the lounge room gaming market without having to actually produce a competitor directly to the xbox/ps consoles
1. As people have mentioned, touchscreens were never designed around gaming. A standard gamepad with buttons and sticks works much better.
2. A big part of living room gaming is local multiplayer, about having your friends and family around you while you play a couple of rounds of Halo or Wii Sports. To support this, controllers must be affordable — common controllers are between $20 and $60 nowadays. You can't support local multiplayer when your controllers cost several hundred dollars.
3. AppleTV should be able to sell to people who don't have an iDevice. Requiring this would mean buying an AppleTV as a serious gaming platform would require, at least, another $199 for an iPod Touch. There are consoles that sell for less than that with a bundled game.
Third party gamepads exist for playing iPhone games on the iPhone (via jailbreak or iCade emulation), but they're not very elegant.
Controlling something on a flat screen while looking at a different screen puts limits on the number of "buttons" you can have and be able to push reliably. Also, holding an iPhone like a games controller would be uncomfortable over longish periods of time.
Apple TV is ready for apps, and it would likely involve a range of partnerships with HBO, Showtime. High quality, reliable streaming to your iPhone, iPad, and TV is a desirable market for paid subscribers and advertising both.
The next-generation GPU in the series Apple uses (PowerVR G6200) is equivalent in power to the Xbox360 GPU (Xenos). So, you could port Black Ops/MW3/BF3. The next expected process-shrink enables this with the same battery life. But Apple's not due for a new iPad, and not everything may be possible yet (e.g. display's power consumption). AppleTV doesn't have the power constraint, so, with GPU upgrade, it could be first announced there.
The reason to rush is to get established as a competitive alternative game platform before being overshadowed by the next generation of game consoles. Game consoles may pay the ultimate price for holding off so long...
Apple has been in this position before with small platforms. A good example is webobjects. They lowered the price and relaxed the license on several occasions hoping it would take off, but so long as it didn't they didn't invest in it too significantly.
I think John might be right that there is a new platform being announced, and certainly this level of TBC implies some very significant software announcements, but I don't think its AppleTV. Or at least not the current AppleTV.
Either some major new functionality in iOS, or a significant new TV product or something else completely seems more likely to me.
That said, iPhone was selling like crazy even before 2.0, so I'm not sure whether that line of reasoning makes sense.