Here’s what I do today. Mostly I’m running XBMC on Linux on a computer under the TV. I get TV shows via bittorrent — mostly documentaries from PBS. I also boot into Windows 7 so that I can watch streaming Netflix via Windows Media Center (which is built in to Win7). Unfortunately, I hate the music interface to WMC, so I use 2 programs.
I just tried the (closed) Boxee beta today. Someone figured out how to download the beta and posted it to bittorrent (see  below). Running on Win7, it searches all the various places to get media (such as Hulu.com and Netflix). It presents you with a listing of, for example, various TV shows and then connects you to the service that will stream it, whether it’s netflix or abc.com or whatever. That’s nice, and helps with the chaos described in the NYT article.
The Boxee Box (hardware) was recently announced (due at CES in January) and should cost $200. It’s not really possible to replace a cable subscription yet, IMO. But, if you’re a non-rabid consumer of tv like me, it does work acceptably well (especially with Netflix streaming).