The Apple TV needs a miracle in terms of a software updates. It is extraordinary limited (can't even get DLNA/UPNP devices in 2013?). It's a huge shame considering its a very well designed device in every other way.
If you need any evidence of this, simply look at the eBay store. JB AT2's go for more than new ones.
I know you're not out and out bashing the Apple TV like some do, so don't take most of this as me arguing with you. It's more a story of my experience and early frustrations that eventually faded away as I gave in to simplicity and convenience.
But first of all, I loved the idea of DLNA until I actually used it in other products. Then I hated it. I found it to be slow and rough to navigate with larger libraries and I ended up having plenty of file format issues with videos that supposedly were compatible. I wasn't excited about trying Apple TV and did it mostly on a whim shortly after the ATV2 came out. I figured that it might work better at least for music and the AirPlay functionality looked interesting. I ended up loving it and now I have three ATV3's and they're all I use for media consumption outside of watching hockey and baseball games on cable.
Sure, I have to make sure all of my video media is .mp4 iTunes friendly now, but that's just so easy with apps like iVI for Mac and/or Handbrake on Mac or Windows. iVI is especially great on a Mac as it converts and adds tags and cover art and directly adds it to iTunes. You can also set it to watch folders. But you know what's best about this setup? It always works and it's fast.
Could the Apple TV experience improve? Certainly, and I have no doubt that it will continue to. But I've been around the block and some with the home theater world and Blu-Ray and other media boxes and PS3s and X-Boxes and they're all such a pain in the ass to use compared to how I use the Apple TV at this point. I think sometimes, limits are good. All those apps I thought I wanted, I found I never used them. For streaming, I use Netflix 90% of the time and Hulu Plus for maybe 10%. I could still use DLNA and countless other apps on some of my other boxes that are collecting dust (though many have been retired to a closet), but honestly, the idea sounds painful at this point.
And to add some context, this is all coming from someone who used to build HTPCs, ran many media servers, used to run and (still know how to...) set up CRT projectors with high-end 9" CRTs before transitioning to digital projection, bought a Sony BDP-S1 to have Blu-Ray immediately, had DVD very early on, nerded out over DTS laserdiscs, used to care about having a vertical center speaker to avoid wave interference and imaging issues and even debated about getting a perforated screen so I could put a vertical center channel behind it like a real movie theater...and on and on and on and on. I used to want it all and tried to have it all. It was endlessly frustrating. As I said, I bought the Apple TV originally expecting very little out of it and a couple years later, it's all I use, and I spend a lot more time actually viewing content now too. Sure, Blu-Ray looks and sounds a bit better, but more often than not, the difference is minimal with ATV3 and the convenience and simplicity of ATV3 more than makes up for it.
Some earlier devices don't support it, but they do support media output via AirPlay from like a video player, or audio only.
