My converted movies are running about 2GB or under. They are not HD quality, but look good for my needs. I use Handbrake with AppleTV setting, but up the Bitrate to 3000.
Hoping with new ATV release they offer HD download and not just rental HD movies. I would pay to have this vs. buying them at the store. Or at least offer digital copy on Blu-Ray disc for an HD quality movie that I can transfer to my MAC.