A service like Netflix would definitely hurt their model - they have competing services (PPV, VOD, and BB@Home).
I don't think it would. I have Netflix and have maybe used one of the dish services once or twice in the last year. Those items were free or with a subscribed package(hbo), which has been on for the life of the account.
To have my tv and netflix in one box, same input on the tv would be great! I would think for a lot of families it would go over great too and perhaps keep people from switching providers because they like only having to use one box. Now if they could add a Bluray player to the hopper as well.