So my AppleTV arrived this afternoon and I just couldn't wait for the cables and switcher to arrive to play around with it -- I simply put it on top of the DVD player, removed the HDMI and TOSLink cable from the DVD player, switched everything over as if I was playing a DVD, and the AppleTV logo was on the screen.
Setup is very straightforward: select a language, select a wireless network, input the wireless network password, and you cross the initial hurdles. The AppleTV then instructs you to go to a machine running iTunes and connect it to the AppleTV using a code displayed on the screen (very similar to pairing with Bluetooth). At first I booted up iTunes and the AppleTV didn't show up in my Device list, so I went into the settings to try to add it, but couldn't see it. Once I exited the settings, then the AppleTV appeared and I was able to enter the code. One word of warning: the second you enter your code and click ok, the AppleTV start synchronizing. However, even though the sync immediately starts, you can go through the tabs an set specific synchronization parameters. For example, I set it to only sync some specific tv shows, only sync some specific movies, only sync some specific music (it seems that if you are like me and have 5 times as many gigs of movies as the AppleTV holds that you may want to manage the music you sync by play-list), and to only sync the last 12 months of pictures from iPhoto.
Even though it was/is in the process of synchronizing, I was still able to stream DVDs that I had ripped to my upstairs machine with no problems at all; there was no discernible lag, no artifacts, etc. It is important to note that I controlled the rip settings for these DVDs and ripped them at the highest possible resolution.
One thing that worried me when I installed the AppleTV was that the audio seemed distorted during the initial startup. I'm not sure what caused that (poor audio recording or some problem with whatever is hardcoded on the ROM), but it has not been a problem with anything that I have streamed. I will say that having the TOSLink out covered with a little flap that you push in when you insert the cable and that automatically closes when you remove the cable is pretty cool; no more worrying about those little plastic plugs to protect the port.
I was worried that although I am running a 802.11draft-N network, the computer that holds all of my material is only 802.11g -- this only seems to be slowing up the synchronization and does not seem to have any noticeable impact on streaming.
The video configuration is a little bit funky in that I have a Panasonic enhanced definition tv, which I thought I had understood would play 720P through the HDMI port, but, of course, 720P is considered HD although not as HD as 1080P. For some reason, when I change the output on the AppleTV to 1080i, the picture is perfect, which I did not think would be the case; I thought I understood about EDTV pretty well and it may be that the optimal setting is 480, but I need to do some research.
I did try streaming some content that I had pulled off of my TiVo and while it's watchable, it certainly is not great, especially as compared to stuff I ripped off the DVDs. Now that I have the AppleTV and have verified how well the ripped stuff works, I will restart my efforts to rip all of my DVD to content and get it into iTunes.
At this point I'm trying to figure out why I even need to synchronize a lot of stuff to the AppleTV as the streaming playback is so good. I suppose I would want some content on the device if I had to shut down my computer upstairs, but honestly that computer runs 24/7 as it is my main file and media provider for my network. Further, I suppose if the network went down I would want some content on the AppleTV just to have something to watch, but it's hard for me to conceive of that happening in such a way that the AppleTV would still be working. One of the limitations of the AppleTV is that it does not stream pictures from iTunes, so I do realize that I need to get all the pictures that I want on their synchronized to the device -- I do find it strange that TiVo lets me interact direct with my iPhoto library while AppleTV does not though I have heard that there is some sort of optimization process that the photos go through to make them look better on the screen with AppleTV.
Overall I have to say that I'm pretty impressed.
More later I'm sure. Feel free to ask any specific questions.
Note: the light on the screen is just from the flash of my camera.