Install Leopard, attach an external USB drive and use it to store and serve your media.
-or-
Use it as a Wuala share machine to generate yourself some free cloud storage space.
I have two ATV1s doing each of these two tasks, a 160GB model for Wuala ( shares 100GB so I have tons of cloud space) and a 40GB model for iTunes service with two 500GB external 2.5 inch drives on a USB hub. I paid about $50 for the 40GB and $60 for the 160GB on eBay.