Audiovox has just rolled out the first such device with its DFL01 player. It was actually announced way back at CES in January,
but is now available to order for $199, which will get you a 7-inch widescreen display, three months of free FLO TV service (it'll run you $14.99 a month after that) and, of course, a built-in DVD player.
Somewhat curiously, it seems that HSN is the only retailer actually shipping the device right now, but it's said to be "coming soon" to Best Buy as well.
Buy @ Best Buy