As much as I am a long-time Apple supporter, I have to say this is probably one of the most half-assed products I've seen Apple introduce in a long time.
No surround-sound support, no built-in support for older sets, a 32 GIG HARD DRIVE?!!! For movies? And TV Shows? Seriously you must be joking. Apple can do better than this. You can BUY 300GB hard drive for under $100 at a consumer rate, surely Apple get something larger than 32GB! With the exception of whatever processor they're using, I could assemble a much more marketable machine for less at a consumer price tag.
As much as I love Apple, they're going to have to come out with a new model pretty quickly to redeem me on this thing.
I totally side with Stowaway. And I am too a major Apple supporter.
To me, the Hard Drive isn't necessarily the main issue, especially because the AppleTV product is to merely hub a stream, and also because a comparable device, such as the Xbox360, sports a small 20GB Hard Drive and still is a shiner.
I strongly feel Apple TV is overpriced for its value and lacking feature (worse than a score of 10 out of 20, IMHO) in comparison to other devices. If Apple TV receives a more positive value due to some "tweakings" to get a standard 480i that does NOT come included with the product's advertised features, then the Xbox 360 downfalls will be accordingly reduced to minimum, so to speak.
If you have both a mac and an Xbox360, a software called "Connect360" will be your ultimate iLife mediator for $20 to receive full HD movies, all of your iPhoto libraries and iTunes playlists and songs (w/out iTune movies) on your full 1080p TV the way they are on your mac. You are even able to copy these media files onto your Xbox360. You can browse and play your iTunes music by song, artist, album, genre or playlist. As you add and remove content to/from your iTunes library, it keeps your Xbox360 up to date. You can even listen to your iTunes songs while playing a game on your Xbox 360. These are the following formats accepted on the 360:
Music: MP3, AAC, WAV, AIFF and Apple Lossless.
Photos: JPEG, RAW, GIF, PNG, BMP and TIFF.
Video streaming, currently only WMV+WMA files are supported (but how many macs don't have Flip4Mac installed today? besides, AppleTV restricts video formats just as much as the 360 does, so they virtually balance each other off).
To stream from a mac to an Xbox360 is as easy as:
1) Connect your xbox360 to an airport express / its own wireless card
2) Click 'Connect' through system preferences (and boom, you're on)
While AppleTV is truly absolutely zero configuration, the Xbox360 isn't that much of a lesser friendly device.
Needless to mention how the Xbox360 is a phenomenal next-generation console with excellent gaming libraries and ground breaking exclusive titles, let alone play DVDs (or HD DVDs through a separated player) with the ability to actually download and play 720p HD movies and TV shows. I understand the goal of Apple is to keep the focus of the media center on the mac, but if we only follow through such a narrow angle, then AppleTV is possibly a decent purchase.
I think that for $100 more (ok, $120 more if you include the mac software), the Xbox360 is a far more valuable streaming device for your HD / widescreen Tv. You are able to play DVDs, there is an impressive quality and quantity of download content for games and media - all on top of your streamed iLife. The Xbox360 goes natively for ALL TV formats, regardless of their format of standard, widescreen or HD, so you do NOT have to replace your TV to a widescreen one. Additionally, you are able to view 1080p with certain TVs through PC input, which isn't rare on most TVs, although I would consider the lack of an HDMI as a negligible downfall, since new HDTVs effectively blur the analog / digital quality difference.
If you consider buying a 360 as a "switch to the dark side", then you're lost.
Apple has to either drop the price or provide double the features on AppleTV.