I apologize, I don't know the answer to your question, but I feel I should address the first post in the thread, as my response is different now.

I recently upgraded my parents' AppleTV using the ATV Flash. It's essentially just a collection of the hacks that are already out there, but much more manageable. In the end all the real "hacking" is done for you.

The end result is that their AppleTV can now play most forms of video (pretty much anything MPlayer can play...which is pretty much anything), and I did a little post-hacking to enable external USB hard disk support, so we now have a 750GB hard drive in addition to the 40GB internal drive.

I'll try to remember to update when I experiment with DVD playback. I'm really interested in its capabilities in that area.

One note: I was hoping to be able to play back 720p MKV files that I've...obtained, but the AppleTV's hardware isn't powerful enough to decode it. It works flawlessly on your standard xvid files, though.