We allow DD to watch TV and if we let her she'd watch it for hours on end attentively (not something we allow regularly but when she's sick or we are it's happened). As is, TV is one of her few sources of native English speakers beyond myself and I definitely see her picking up a wider vocabulary from it, so I'm not one who sits in the TV is evil camp.
Like you, if she's messing around the TV goes off. I don't really understand the purpose of having the TV on if you're playing with another activity? It seems like it would be better to give your full attention to that activity than split it. Now, we do get a constant stream of questions during most shows but I see that as a different than actually playing with a doll or something.
As for content, it depends. Sometimes it's typical kids shows but other times we'll let her watch documentaries/science shows with DH. We also put on youtube videos of various sports that she would otherwise not get to see in person (e.g. ice skating, gymnastics etc).
