Actually its very true, the Nvidia GeoForce 7300 Go GPU on the appleTV does have h.264 video decoding on board and is accessed via its TrueVideo sofware api. Now, its clear that Apple has access to this api and must be using it to offload at least some of the h.264 decoding to the GPU. How much and it what fashion is unclear, but I would agree it makes sense.
Consider, how as of atv2 (which is of course just a software update) encodes that once dropped frames now play smoothly via a simple software update. Originally I thought that the gpu only did cavlc decoding and left cabac up to the main cpu, however there is evidence to be found otherwise that cabac is also decoded via the nvidia gpu. Also a rather strange note that might give a clue, as of atv 2 the maximum specs for h.264 are actually higher than for standard mpeg4. Which would fly in the face of convention except when you consider that only the h.264 can be decoded by the gpu.
This may also help explain why vlc or other media players hacked on the atv may have issues keeping up with more intense decoding if they do not properly access the features of the nvidia gpu like the atv's stock subset of Quicktime does.
That 1 ghz none core duo cpu with only 256 mb of ram would have a hell of a time keeping up with decoding 720p h.264 plus managing the vm and network buffer and run its interface in any kind of a fluid fashion without some decent help from the 64 mb video gpu.
But, thats just my .02