The problem with 4 player split-screen depends on the current trend of games and hardware. Let's see, the current trend of games is anything graphically intense: FPS, RTS, RPG, Sports, Racing. The current hardware is (not including the Wii) something that can output the most detail and highest polygon count at the highest resolution.
So when the current games are trying to use the current hardware to its full potential then you get issues with resizing and re-rendering 4 seperate instances of the same game.
I think with the rate that both TV and console prices are dropping and LAN being as blazingly fast as it is, LAN gaming can only be a positive step towards the future of 4-player local play. How many of you currently have more than 1 HDTV (size doesn't matter) in your home? How many of you currently have more than 1 new console in your home? With the current prices of new consoles and HDTVs, in my country, Canada, you only have to work for 8 days at minimum wage in order to get enough cash to play 4-player coop in most FPS games:
minimum wage = $8.75 CAD (Ontario)
37" HDTV = $600 CAD
XBOX 360 = $200 CAD (Arcade/20GB)
Game = $50 CAD