I've got two AppleTV Generation 1 units in my house and one AppleTV 2nd generation unit which I've had for over a year, but just now plugged in for the first time in a new room setup. I didn't use it right away due to the need for tethered jailbreaks at the time I got it to use XBMC, etc. I still need to get a micro-usb cable, but I decided to try it out now anyway. I tried the default software (not sure what firmware it was offhand, but clearly the old style interface) and then upgraded to the new 5.0 software. Obviously, some things are much better (Netflix, ability to decode most HD content with total aplomb where I had to keep it at 3.x with relatively low bit-rates with Gen1), but other things I think are definitely a step down. Some of this is due to the lack of on-board storage, but other things are just bad changes, IMO. I won't comment about the differences between V5 and earlier main interfaces since most of my issues that really bug me aren't with the main screen, although I do wish they used a brighter outline color for which icon is selected. At a glance, it's hard to spot the relatively dark blue outline. Why not use a BRIGHT halo effect or something? Gen2/3 ATV Cons: * Hardware-wise, the lack of an analog output for audio sucks. One of my rooms (currently using a Gen1 ATV) has a very nice analog audio rig and I'd have to get an outboard Digital To Analog decoder box to use it there. Why they couldn't include a little mini-jack is beyond me. It would have raised the cost 50 cents. * I cannot get AppleTV Gen2 to pass a DTS Audio CD Signal, even in forced 16-bit output mode. This worked automatically in Gen1 ATV. I don't know offhand if XBMC can do it or not. The last time I looked into there was some question about the hardware driver's ability to pass a signal unmodified. * I have to go to the Computers sub-menu in Gen2 to get to my collection which is then in another set of menus. It is in the main movies menu on Gen1, which saves me a couple of clicks. Similarly, I preferred the "device" setup in iTunes over forced home-sharing (which you have to register and you have to wonder if they're monitoring everything you do since it requires an iTunes login to use it). * Photo Albums take FOREVER to load up by comparison (I have over 6000 photos organized by folder/name). This is largely due to the lack of local storage (Gen1 stores all the photos on the local hard drive so they come up almost instantly). I have to wait like a full minute just to see my folders/albums and THEN it still is loading the previews up much slower than Gen1 AppleTV. XBMC on Gen1 streams photos, but I think it must store a large buffer locally on the hard drive as well since although it's not as fast as the AppleTV interface on Gen1, it's still about 10x faster than Gen2 AppleTV. * Movies are no longer 'stacked' by SHOW into sub-folders. For example, all my Star Wars movies appear under "Star Wars" in Gen1 whereas as in Gen2 it just lists them all one at a time, making the movie list a LOT longer than it needs to be. Because movies don't stack in sub-folders, the nice round-robin 3D effect is no longer present for series like Star Wars and so it just doesn't look as cool there. Similarly, TVShows list all seasons as separate entries instead of putting them in a sub-folder list, making the list "by show" NEEDLESSLY LONG (some shows can have over 10 seasons!) The iCloud ones could just press left/right for season changes. WTF don't they do that for the iTunes served ones??? Similarly, the NetFlix interface makes you change season through a menu and it's just bad ergonomics, IMO. They clearly saw a better way to do it in both Gen1 and especially the iCloud TVShow listing for Gen2/3, so why is it so inconsistent (and annoying)? * iCloud is nice for movies that were purchased from iTunes since you don't need a server on to watch them. The down side is that if you only bought or could only buy an SD version, you can't even get a RENT option for the HD version if you're willing to pay to watch it in HD. It simply isn't available and forces you to watch the SD version. Pros for Gen2/3 Interface: * Movies have more information like rotten tomatoes and user reviews you can read from within the interface (something they never bothered to add to Gen1). * Menu response time to change subtitles or audio (holding in the select button) is much better. * I like the dedicated play/pause button on the new remote. It really helps when you're outside the 'now playing' screen (although you could pair a secondary remote with Gen1 that had extra buttons). * Netflix player is nice if you have Netflix (their HD content looked pretty decent, but too few movies have DD 5.1 sound which is horrific in 2012 considering I had DTS/DD clear back before DVDs even existed! (On Laserdisc!) * The ability to get more apps is nice, but they need some more (Hulu would be nice, for example and for goodness sake WTF don't they have a Weather App built-in to this thing or a clock even? Apparently 'genius' at Apple means "lacking common sense". Overall, many differences in the interface aren't that huge a deal, but a few things are definitely a step back in the wrong direction (like lack of show or season stacking). And there's no excuse for the lack of an analog output on this thing for older stereos. Bluetooth for wireless headsets wouldn't be a bad idea either. Maybe AirPlay should work in BOTH DIRECTIONS? Stream the audio to your iPhone/iPad/iPod Touch in your pocket that has a nice set of headphones attached to it so you can listen to your movie in privacy (don't disturb someone sleeping, etc.)?