I don't see how in the world it would cost $250. Apple's AppleTV debuted awhile back for $99 which essentially contained iPhone 4 hardware in a little box. I recall even musing on this forum that Apple should try and open up the AppleTV to allow games to be played on it.
But even that would present challenges... in my opinion, the biggest one is that not all games can be played with a controller. Games would have to be retrofitted to allow controller input if they even can. You could probably make a touch-based game like Angry Birds work with a controller (it's not much different than Worms), but a game like Cut the Rope where touching the screen in a specific spot is important simply will not translate over. Although, given the multitude of games that use "virtual joysticks" and the like, there would definitely be quite a few that would work.