A while back, some kind soul on this forum pointed me to
DVD Assist which does exactly that. It worked as advertised on my Macbook, and has me seriously thinking about getting a Mac mini at some point to catalog/watch all of my DVDs. Unlike the AppleTV, the Mac mini + DVD Assist solution allows me to preserve DVD menus and -- more importantly -- multichannel audio.
It's a shame that AppleTV can't do for DVD movies what iTunes did for CD music -- the MP3 era, and specifically iPod+iTunes, revolutionized how we manage and listen to our existing music. I can't remember the last time I carried around a clunky CD and played it in a CD player. Just buy it, rip it, and put it in storage. It's time for the same kind of revolution with our existing DVD video content. And shamefully, this won't happen -- not with the AppleTV, and not with any other mass market commercial product -- but I kind of understand why.
Directly allowing users to rip DVDs like iTunes does for CDs would never fly with the movie industry because they got a nice little US law passed called the DMCA. Breaking the DVD encryption is technically illegal under the DMCA, so Apple won't touch that with a 10-foot pole. I'll bet Apple would love to include this functionality because it just makes too much sense, but the legal/political reality is they can't. And while AppleTV is kind of neat, there's no way I'm either (a) repurchasing my video content in a form that AppleTV can use, or (b) ripping DVDs in Handbrake and losing all the DVD features. That makes it exactly useless to me, unfortunately.
Really, really too bad. Let's hope the future changes things so that Apple can unlock a feature like this with a software update. But I'm not holding my breath.