Well, I have had the AppleTV for about 2 months now. I am somewhat pleased and somewhat disappointed. First of all the downloading of movies and playing them is flawless. The price of a movie is pricey at $3.99 for DVD quality and $4.99 for HD quality. So I am sticking with Netflix for most movies. But is nice to have the "on demand" option available. It is true the selection choice is limited. I love streaming iTunes to the stereo and TV. It uses AirTunes feature and once again is seemless. I have a USB video recorder for my PC to record HD over the air TV. It plays well on the PC, but the format is unrecognized by AppleTV.
Then comes Boxee. A very good hack for the AppleTV which allows searching your own network for shared files and allowing playing of almost any format on the TV. One problem is that Boxee is not as efficient as the native AppleTV so your video is jittery. It is a work in progress and gets better with each update. My favorite feature of Boxee is Pandora.com. Boxee has applications modules which people write to access content online. The Pandora one is an online radio site which learns your tastes. You rate thumbs up or down and it learns. You can have many stations and the graphics are very professional. It also has access to Hulu.com video. But the feed is jerky and playback is unwatchable. At first I thought it was because of the slow AppleTV processor. But the downloaded movies from Apple work great with high resolution. Hulu is a joint venture of a bunch of TV networks, but they don't understand computers well enough. It is jumpy on my PC too.
Another application is Joost. It hasn't died yet. Their network is setup to get bits of the show from many different sources. This makes playback much better. But at times the resolution fades to keep smooth playback. Plus there is too much crap programming to wade through to find the good stuff. My son likes watching "Transformers" cartoons. They have almost the entire season in order. But there is no parental filters, so can be dangerous for kids.
Installing Boxee was a breeze. You create an image file by downloading a simple script file. Then transfer it to a thumb drive. Shutdown AppleTV. Plug thumbdrive in AppleTV USB port. Reboot. And now it is installed. It uses the AppleTV menu system too so it looks very clean. Updates are done from the AppleTV too.
One beef that I have is that Apple does not move the AppleTV software forward too fast. The Boxee people claim that Apple has been accepting of having Boxee on AppleTV and does not break it with updates. Just in case Boxee will block Apple updates so you have to request them yourself. The Apple updates are so rare anyway though.