What Nexus Q Should Have Been
The Nexus Q failed before it even launched because it was expensive and poorly executed, but it was definitely a cool idea. I think google should have made it an open API/protocol instead of a device. I think google should make Q into a cloud-enabled equivalent to airplay.
How the other guys do it
When you airplay itunes cloud music on an apple TV using an ipad, you really download the music stream from North carolina to your wifi router, beam it to your ipad, then beam it back to the router and beam it to the apple TV. There's extra steps here which almost certainly degrade the sound quality and the overall speed and responsiveness of the stream, hurt battery life and are super illogical.
How Google does and could do it
When you listen to google music on a nexus Q, you're streaming the music straight from the cloud to the router to the Q and only using your android phone as a remote. your phone doesn't have to hammer on its radio by simultaneously downloading and uploading a song or movie. This is better, but its limited to Google Music, Google Play Movies and Youtube.
Using an app on a phone to control a cloud connected player could easily be extended to other apps like netflix, spotify and amazon. Well, not easily, but its certainly possible and Google could do it. It would be a huge addition to the android accessory ecosystem.
Needs a wifi connection - This isn't much of a big deal, to use Airplay or DLNA (Allshare, playto, htc Link, ect) both devices need to be on the same wifi network, requiring that network be also connected to the internet isn't much of a stretch. It might even be possible for google to make it so that your phone needn't be connected to the network the Q is on, making this less limited than airplay.
Need your stuff in the Cloud/ No local playback - Maybe I'm crazy, but close to 100% of things I want to show people are on youtube. Its either that or we want to rock out to some music, all of mine is in google music. Any video worth showing off is worth posting to youtube (hey, it could go viral). All those movies on your SD card are probably there illegally, just sayin.
Needs a $300 Nexus Q - Not really, google could certainly make this into a standard (like made for ipod) that anyone could build into any chunk of cheap chinese-made electronics (or Bose could build into an exquisitely expensive stereo). Google really should do this, a Google TV should be any device that works with this standard and can do video. Audio-only devices could be called Google Radio, you're welcome Google.
Needs too powerful/expensive hardware - This doesn't need anything more sophisticated than an apple TV, and those only cost $100. Google Radios would be cheaper than Airplay speakers because you have to pay Apple if you want to make an airplay device, Google doesn't usually charge for this sort of thing.
Android updates are slow, so the ecosystem will forever be too small - The current Nexus Q works with anything 2.3+, which is inching close to half a billion devices, its probably higher than that by now. There's no reason this new unicorn Nexus Q couldn't also.
You can't use this to play music in your car or a boombox in the wilderness - Yeah, you're just left with bluetooth or a line-in jack here.
You can't mirror the device display for presentations and games - I can't think of many mobile games that would be better on the big screen, but there might be a few. There's no reason why Google Docs couldn't stream the presentation from the cloud, that would actually be pretty slick; Google, do this, even if you don't make my unicorn Q, stream presentations and use my phone as a remote, it'd be badass.
Multiple remotes - You can already share control of music and youtube, and its pretty awesome, this can only get better with an app ecosystem. Youtube parties are dramatically improved when you don't have an awkward pause while your friend figures out how to use your computer.
Multiple sources - It could be possible to seamlessly build up a queue of songs from spotify, amazon, google music, ect, all from your friends' phones. Or mix vimeo videos into a youtube party.
NFC setup - Letting a new device control the Q could be as simple as tapping it and letting NFC work its magic. The Q control could be built into Android. It would make showing your friends a new jam very simple and painless. There's no way connecting to someone else's Apple TV is this easy.
More compatible devices - TV's all have the hardware to work with this, if Google doesn't charge for it, then in would be essentially a free feature to implement. It could become a standard feature on TVs pretty much overnight.
I think the nexus Q has the potential to be functionally identical to Airplay, but technically superior. Google just has to open it up and convince app and accessory makers to take it seriously. What do you think?