I know atv 2 was able to decode and play back SOME 1080p files befor today, and i know the output is limited to 720p, but i was playing around with the recent update by downloading a prior purchase i made (Monsters inc) to compare the 1080 version to the 720p. First off, at least for this title, the encoding is much better. The bitrate is only about 25% higher but PQ is much better. By mediainfo stats they are finally encoding high profile/cabac and it shows. But here's the thing. I have a lot of bluray rips, and a few of them i remuxed to an m4v file for itunes to try out on the Atv. No reencoding the video at all. I also have a lot of 1080 high profile encodes out of imovie. Prior to today the atv would try its best to play them and usually error out. But ona whim i tried playing them again after the update and they're smooth. I'm talking full bluray of hugo, 30gb file or whatever, and it plays it as well as my ipad 2. It did stop to buffer--i'm going to switch to ethernet and see--but this was very unexpected surprise. Anyone else have a try?