Depending on the hard drive, you maybe be getting this error:My experience it that the method you use somehow corrupts the update process. What you should do is retrieve the three disk images off of your original ATV an onto your Mac's hard drive ATV Cloner. Then use ATV Cloner to put them onto your new drive. After that your update process should work.
http://dynaflashtech.net/2009/08/18/atv-drive-problem-children/
If so (after using atvCloner's normal cloning method ) use "Large Drive Formatting" to get a proper format.
Try it first without though.
Edit: note, I will try to elaborate on when to use the "Large Drive Formatting" in atv cloner, however basically it would be sure if you see anything described in the link above in you're AtvCloner activity log when using the normal drive prep method.