For me, the Apple TV has always been somewhat flakey.
On 3.0,
I get flicker when switching from another source to the Apple TV (HDMI) on my HDTV. The Apple TV first appears, then the screen goes black, then theres a popping sound and then it reappears ready to go. I take it its redoing the HDMI handshake?
I also keep getting the Volume low. Resetting volume. bug. It tends to happen after I playback content from the music category and switch to podcasts or movies.
Playing back HD movies is still a chore. Sometimes the Apple TV is slow to respond to fast forward or rewind and accessing the chapter menu on an HD movie usually causes a short pause.
The unit has also reset itself once while playing back a video podcast.
Otherwise, 3.0 has been relatively stable for me.
However, It still doesnt update dynamically. For example, I have to manually sync in iTunes if I want content thats been added to iTunes within the last hour or so. What is the timeline for the Apple TV to reload content? Hours? Twice per day?
I guess my tolerance level for the device is somewhat high. So, these minor issues dont really bother me too much.
Did anyone ever confirm that it was still running 10.4? And what about HTTP streaming?