Well, that is odd.
I linked my wife's imac library (ATV, 'computers'). Then I went to her iphoto.
Allowed sharing, specified the event.
Now Apple TV has a section called 'shared photo's' in the photo section.
The photo's are streamed from her iphoto direct to the Apple TV.
The photo's in question are not in her itunes,or mine they only exist in her iphoto.
My only issue is, I can't get this to work on my machine, the itunes of which is linked under 'computers' on ATV.
For my machine, photo's need to be copied down as you suggested via iTunes.
Very odd....