Sun released an open source version of Java in 2007.  While OpenJDK doesn't currently meet 100% of java compatibility test suite it is pretty close.  OpenJDK currently is pre installed on the most recent releases of Ubuntu Linux as well... not sure if it comes with any other version of Linux but I'd bet on seeing it a lot more very soon.  So if Oracle does try to start raising license fees on Java I think we would see a quick transition to OpenJDK away from Sun/Oracle's Java.  I don't really think it is in Oracle's interest for that to happen though.  Without continued participation from the open source community on Java it could fall behind the Microsoft .NET technology stack.

As far as creating more of an Oracle 'appliance', the Sun acquisition does give interesting possibilities.  I really don't think Oracle wants to go in that direction though.  Maybe some low end systems, but I doubt it.  Oracle could already have done this by bundling pre built Dell/HP/IBM systems, Linux, and Oracle together as an appliance.  They do have the "Database Machine" of course, but so far as I am aware they still don't have anyone who is willing to admit using it.  That system is only for data warehousing though, which is a small part of the total Oracle database market. I think that Oracle's best interest is in making sure that other hardware vendors don't start pushing other alternatives such as Microsoft SQL Server or PostgreSQL over Oracle or MySQL.

Oracle also has the Oracle VM product - I think this is more of the direction they want to go.  Just staying with pure software as much as possible.  I really don't think Oracle wants to be in the hardware business.  My bet would be on Oracle trying to sell the Sun hardware business as soon as possible.  Probably to HP or IBM.  I wouldn't be surprised if Oracle is already in talks with IBM to offload the hardware business to them, likely with some sort of clause that requires IBM to create an "appliance" version of Oracle as part of the deal.