In a report to clients issued Friday morning, Piper Jaffray’s Gene Munster makes the case that Apple (AAPL) is well positioned to do for the vast wasteland of television what the iPhone did for cellular telephony — and may in fact be preparing a stand-alone, Internet-connected TV for release within the next two to four years.

If his thesis is correct and the product is a success, the Apple Internet TV Munster describes could be the sixth major hit of Steve Jobs’s career, the successor to the Apple II, Mac, iPod, iPhone and iPad.

Munster cites several reasons to believe Apple is working on such a project. Among them:

• The hobby. The Apple TV set-top box, which Jobs refers to as a “hobby,” has not had a hardware update since it was released more than three years ago — an eternity in the life of an Apple product. Despite that, writes Munster, he sees “several indications that the company remains interested in the digital living room.”
• The home theater. Munster interprets the release of the new Mac mini with a built-in HDMI output as a sign that the company is trying to simplify the process of making the Mac the center of a home theater. “We see this as a small, intermediate step towards a larger move into the living room with an all-in-one, connected TV,” he writes. “Also, recent media reports have indicated that Apple may soon release an updated, low-cost Apple TV set-top-box with updated software and possibly an App Store, further indication of continued interest in the living room and progress towards a television.”
• The hurdles. Munster notes that in June, Jobs identified subsidized set-top-boxes and a lack of TV broadcast standards as the primary hurdles in the industry. “The TV industry has a subsidized model that gives everyone a set top box for free,” Jobs told the audience at D8. “So no one wants to buy a box.” One solution to this problem, says Munster, is to create an all-in-one, connected TV that does not require an extra box. As for the lack of standards, Apple could get around that with an Internet-based iTunes TV Pass that would sell for $50-$90 per month. “Such a product,” writes Munster, “could effectively replace a consumer’s monthly cable bill (~$85/month) and offer access to current and older episodes of select shows on select channels.”

One model for what he is talking about, says Munster, is Hulu Plus, a free app for the iPhone and iPad already available on the App Store that will soon be offering a wide range of current and classic TV content for $10/month.

Independently, the New York Times Friday quotes unnamed sources within Apple who say the company is working on a update on its existing television software. New hardware, they hint, could also be in the works. See here.

[Follow Philip Elmer-DeWitt on Twitter @philiped]