If I can play any content I want without converting it first, possibly, I would say it is acceptable. I would still hope for a Wide 720p native resolution screen since this is primarily an entertainment device with MOVIEZ being punted as a selling point and we live in 2010 and not 1998 - era of 720 by 576 (standard def) DVD.
Why wide? Because most movies are shot 16:9 aspect.
Why 720p? Because iTunes and other sources now provide 720p video - which can also be streamed. YouTube HD does.
Sadly seeing how the low res screen has remained in the iPhone and iPod Touch, I doubt we'll see this soon. Not until these screens become dirt cheap.
So yeah - with Multitasking, 720p 16:9 screen and hopefully more storage say 128GB SSD inside - it would be a nice toy/entertainment device for long flights/dentist waiting room visits.