1) There is very little memory on the board. Just enough to buffer a few minutes of video if your bandwidth gets congested temporarily. Just enough flash memory for the software. Instant viewing is done by buffering the minimum video the box thinks it needs to avoid interruption due to variable bit rate encoding.
Edit: The buffer is 64MB. 2-5 minutes of video, depending on the stream.
2) If you have Windows and IE, go to Netflix.com choose 'instant watch'. The video you stream to your PC is the identical stream we're pulling to the box. So you can preview the quality without even having the box.
Most videos, depending on the title, look quite good on my 60" Sony HD.
Actual DVD will be better, of course, if for no other reason than surround sound. Audio tracks on instant watch titles are stereo only. Surround sound will come with HD streams.
3) It will up convert to HD when HD is made available. At this time, it only output 480p 4:3, and 480p 16:9. You will only be able to get HD resolutions on HDMI with HDCP support. Component video outputs are limited to 480p for copyrighted content because there is no copy protection.
4) Bandwidth is a very complex subject I won't tackle now. But yes, if your cable modem is fast enough, it'll work. It has a few minutes of video buffer, so as long as it can catch up from time to time it'll work.
It really all depends on how you're using it.
5) It's a new chip made by NXP semiconductor. PNX8935
http://www.nxp.com/applications/set_top ... tb/stb225/
6) Not user expandable.