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USB doesn't have the bandwidth to drive HD. To run DVI / HDMI requires a pixcel clock of about 1485Mhz or about 1.485Gb/sec. USB typically only runs at 12Mbps, although high speed can run at 480mbps.

So, as you know, such a device would really have to do all the processing itself, have it's own memory, and only use the wii as an interface to the DVD and bluetooth and 802.11 controllers. It might save $50 from the cost of an entire new console, or maybe $100 as it wouldn't need a backward compatibility chips if existing video is also routed through it...

Far more likely for a new model with backward compatibility than an add on kludge.