Lots of good info being posted, thanks for that. Here's an update on our end.
Our cable is officially cut. We've sold a Rogers HD box as well as one of the PVRs (and some other electronics around the house) and bought a refurbed macMini that is acting as the central hub hanging off the tv.
Here is the current (and most likely final) setup:
* macMini on main tv.
* Hulu Plus ($7/month), covers about 80% of what my wife watches. We have a Plus account as some shows keep all episodes available under this package. House, Lie To Me etc. That takes the pressure off having to keep up weekly with watching. Not all shows do this archiving though.
* Netflix USA ($7/month). We watch tv series on here - Battle Star Galatica etc and some movies/docs.
* VPN. As a few have mentioned we are also using usvideo.org ($5/month). As a backup I have a traditional VPN service with OverPlay.net ($10/month).
. I've setup a tv homepage to make life easy getting to videos outside hulu and netflix. CBS doesn't have vids on Hulu so we go to the site directly for some stuff. There is also some good stuff on Discovery and History. PBS also has a bunch of stuff to fill the "specialty" niche when you've had enough of the blood and guts on primetime hehe. The VPN section we have to use Overplay as they don't work with usvideo. HGTV has a ton of videos online, pretty much their whole catalog. +1 for the wife factor here...
* Boxee. We have this running on the macMini. It gets minimal use these days, it's actually been easier to just use the website to launch directly to the sites as needed.
* Controlling macMini. We use an app on the iPad called Mobile Mouse. Very handy! It actually shows your mac Menu Bar making it easy to launch and kill apps. We also remote in from a macBook when more fine control is needed. You can also get mini bluetooth keyboards/track balls but we haven't had to get one of those yet.
* Bonus content. We have an OTA antenna setup and jacked into our mac via eyeTV. The antenna is only in the house right now, not on the roof. We use it to record off CTV which luckily they carry a lot of CBS shows (that's aren't in Hulu). We use the native eyeTV app to watch the shows allowing for quick fast forwarding and rewinding. If eyeTV is running on another mac in the house you can get at it via UpNp but as you may know fast forwarding over UpNp is not as tight.
* Sports. I'm a soccer fan and hockey fan of course. Setanta-i is $16.99, same as the tv channel in most markets. PremierLeagueLive.tv is $14.99 and is a collaboration with Setanta and Sportsnet. They show 90% of the EPL games live. The only ones they don't have rights to are the ones that Fox Sports or ESPN pickup. They don't make this obvious but it's usually 1 game a week. ESPN3.com will play it if they have the rights. If FOX has it you are SOL. I have subs to both now for testing, I love my Sunday morning Setanta coverage so it's hard to let it go. As for hockey there is NHL.com's GameCenter Live. The blackout restrictions bother me. I understand the reasoning to protect ad revenue but I don't have tv. I've emailed them to state my case that you can't assume people have traditional TV anymore. they responded and were pretty cool about it. There are other options to watch hockey that are most likely less legal. Yahoo Hockey usually streams one live game a night for free.
* This really has been easier than expected.
* Hulu has to get separate rights to stream to the "web" and to devices like the PS3 and iPad. Keep that in mind as the web will have everything but the PS3 may or may not depending on what shows you watch. It's a bit of a pain but the macMini has eliminated that issue. Netflix doesn't have this issue.
* A&E is the only site that doesn't play too well with usvideo or a vpn. The featured vid links willwork but going to a shows page to get a full list of episodes doesn't currently work.
* Wife Factor. It's really not too bad, biggest part is showing the potential of Hulu, how it auto queues etc. If they tend to spend a lot of time on specialty channels we've got your HGTV covered. TLC not so much yet but I'm watching them and will report back.
* What's nice about this is we have the control over what we pay for.
* If anyone needs a video to help "convince" let me know, I'll put one up on youTube showing it's use.