A while back I made several attempts at getting my Blu-ray MKVs converted to a 1080p MP4 format that would play smoothly on the ATV2. No matter what I did, the files simply would not play smoothly. During this time I had jailbroken a couple of my ATV2's and could play these same files smoothly via XBMC. So I knew that the limitation was with Apple's built-in player and not with the ATV2 hardware (Note: The ATV2 will not *output* 1080p even via XBMC, but it will play 1080p files downscaled to 720p). For anyone wondering, the reason that I wanted to maintain the resolution at 1080p was so that I could have a single version of the movie on my server which could be played at 720p in rooms with and ATV2 and in other rooms with a more capable streaming device/computer at 1080p. I also figured that eventually Apple would get around to releasing an ATV3 with 1080p output capability. So, I was looking to produce a future-proof 1080p MP4 file, so that I didn't have to go through the effort of reconverting these movies again in the future. Anyway, as I mentioned, all of my tests with Handbrake failed. The files would play smoothly via XBMC, but have noticeable stuttering and/or reduced framerate when playing the same movie through the native ATV2 UI/player. Now flash forward to the release of iOS5 and the iPhone 4S. The iPhone 4S can record video at 1080p and you can stream those videos over AirPlay to the ATV2 which will play them smoothly (albeit output to the TV at only 720p). Now, I have trouble believing that the iPhone 4S is doing on-the-fly transcoding from 1080p to 720p before sending the video over AirPlay, so I'm assuming that the ATV2 is playing these 1080p files smoothy on its own. This would suggest that there should be a way to encode my Blu-ray 1080p files to a 1080p MP4 format that will play smoothly on the ATV2. But even after the iO55 update, my ATV2 still won't play the encodes I've made smoothly. Has anyone else attempted this and had success?