I am not trying to stir the pot here but this is how I see things-
It is a shame to force fit media files to comply with a player. In this case, having to convert or re-wrap a file so that it will play with an ATV seems almost backwards. ATV has its advantages with iTunes rental/buy of media while plenty of other media players allow for all sorts of media files without conversion (typical file formats).
If one was to stay with ATV, I would recommend they investigate Plex so that no file conversion is necessary directly for the ATV. I admit I use another player and though I don't like the main menu, could have a bit of a better remote, it plays pretty much all standard file formats with the use of Kodi application(where Plex original came from when Kodi was still XBMC). I can play MKV various resolutions, m2ts files (akin to those in blue ray movies), vob files (found on DVDs) and much more. In fact, I demonstrated the unit to a friend who has a smaller 720p TV and no sound system. I brought up an m2ts file (1080p) that had only HD audio and Kodi and the player output 720p, stripped the HD file down and output stereo for the TV speakers. My friend was more than amazed at the image quality and the fact the audio played well.
Again, my only point is that the ATV is very limited. If you remain with the limitations, it is a nice "iTunes Front End" but certainly not worth the time to convert entire libraries to force fit it into ATV limitations. My collection are m2ts files, MKV, Vobs, mp4, avi, etc. I don't bother with iTunes other than music.