Both the ATV1 & 2 need audio track 1 to be stereo AAC and track 2 (optional) can be DD5.1
Try encoding with Handbrake, its ATV presets do this properly.
Thanks - the issue however for many of us is that we have large numbers of ripped DVD's (in my case more than 600) which have been ripped with the likes of Aunsoft's Blu-Ray Ripper and those files only have DD 5.1 encoding so it isn't realistic that we are going to re-rip our files.
The bigger question however is why would Apple disable the ability to play these files and simply drive people towards other products like ROKU and Boxee Box or to jailbreak their ATV2? The ability to play .mov or mp4 files encoded solely with DD 5.1 was available before the 4.2 (4.3) update so why ruin what was a great product?