Sorry Steve but Western Digital appears to have a creditable candidate to put a serious dent in the AppleTV's value proposition. Check out the latest offering from Western Digital, the WD TV!

Whilst AppleTV is probably great for consumers who would like to purchase a movie on demand through iTunes, its restriction to being able to only play mpeg4 and MOV files, plus the need to interface with iTunes makes it a lack lustre device for someone who already has videos in a variety of formats, e.g. AVI or WMV.
WD TV on the other hand is strictly a 'plug and play' solution that (we have to say) is virtually 'idiot-proof'. All you need to do after bringing it home is to plug it into the power and using a HDMI or the supplied RCA cables attach it to your TV. The next part is where the magic really begins to unfold.
All that's needed is any USB hard drive containing either movies, music or even images that can be read by the WD TV. Plug the hard drive into the WD TV and viola! The WD TV, regardless of file structure contained in your hard drive, is able to search and identify all of your playable media to be presented in either a list or thumbnail view on your TV - instantly!
Although we initially braced ourselves for average to poor image quality; the 1080p HD quality blew us away!

Specifications include:
File Formats Not Supported
Does not support protected premium content such as movies or music from the iTunes® Store, Cinema Now, Movielink®, Amazon Unbox™, and Vongo®
External Drive Formats Supported
FAT32, NTFS, HFS+ (no journaling)
Performance Specifications