But how easy is it to install? ... no hack that lets it run iTunes behind the ATV interface?
The ATV interface runs on top of some version of OS X Tiger (10.4), so I would imagine there might be a way to have it work. I long ago ditched the ATVOS on my ATV1's so I don't remember clearly, but in stock form don't they already allow library access to other devices on the network? That to me would suggest that iTunes is already running, you would just need a way to manage it--again if it's already sharing you should have limited management abilities via iTunes running on another machine on the same network.
Anyway, it's really very easy to install 10.5.8 if your only concern is running a quiet, low-power iTunes server. You just need two small Torx screwdrivers and a PATA to USB interface for 2.5" PATA drives.
You can also set it up for other server duties, I also use mine as a central GoodSync repository via SFTP.
[Edit]: Those of you more familiar with netbook offerings: what is the cheapest netbook out there? I assume just about anything can run Windows XP and seem to occasionally see them going for ~$149 new. One of these could also be hacked to run Leopard if you don't care about video and will hard-wire to the network (no worries about drivers for wi-fi).