In a Feb. 17 letter to Circuit City CEO Philip Schoonover, Blockbuster (BBI) offered to pay more than $1 billion for the chain. But, to date, Circuit City (CC) hasn’t fulfilled a request for due diligence necessary to make the bid definitive.

Why? In a conference call today, Blockbuster chief exec Jim Keyes described the offer as “simply too attractive to ignore.” But it seems Circuit City also thinks the offer might be too attractive for Blockbuster to finance. “… To date Blockbuster has been unable to satisfy Circuit City and its advisers that Blockbuster’s proposal could be financed,” the electronics retailer said in a statement. “In particular, Blockbuster’s proposal appears to contemplate a rights offering of unprecedented size relative to the issuing company’s market capitalization and at a price that is at a significant premium to Blockbuster’s current market price.”

Well, yes, there is that. And, of course, there are other issues as well. Like what, exactly, are the synergies between a foundering movie rental chain and a foundering electronics retailer–aside from the fact that they’re both, you know, foundering? If it’s Blockbuster rental kiosks in Circuit City stores, the alliance would seem doomed to failure. Wait. It is Blockbuster rental kiosks in Circuit City stores?

To be fair, Keyes says digital content is important too, and he seems convinced that Circuit City will provide Blockbuster with the infrastructure it needs to distribute video to TVs and mobile devices. “What this combination provides is the ultimate distribution channel for [digital] content,” he said this morning. “It’s not necessarily downloading content to the PC that will ultimately capture the consumer’s imagination. It’s the opportunity to get that content on your TV and your mobile device that is a game-changing opportunity.”

A game-changing opportunity for Apple (AAPL), maybe. But for a foundering, outdated video-rental outfit?