Why not? I've had this very same question. So-called "connected TVs" are starting to appear, in addition to other TV streaming boxes such as Roku or AppleTV. Most of these "limited-use" boxes are inexplicably handicapped, capable only of navigating to a handful of sites, and worse, sites that almost always require a paid subscription. Why not use one of these low-cost general purpose computers, to create a low cost and unhampered IP front end?

I think you'll have to install the decoder, though. No sign of anything pre-installed.

http://www.lifehacker.co.uk/2014/07/14/5-best-new-features-raspberry-pi-model-b

http://www.dreamgreenhouse.com/features/rpi/io/index.php

Yes, you can get the source code from

https://www.cl.cam.ac.uk/projects/raspberrypi/tutorials/image-processing/

etc. Step by step programming.

You could also try to implement H264 encoding/decoding hardware acceleration using gstreamer (specifically the gst-omx http://gstreamer.freedesktop.org/releases/gst-omx/1.0.0.html).

More info:

http://raspberrypi.stackexchange.com/questions/17098/gstreamer-with-gst-omx-raspberry-pi