Forget the Apple TV. Although it has the style and ease of use I think it lacks flexibility to play different file formats and being tied into iTunes, not to mention the high, Apple approved, price point for the machine. Although most of this can be circumvented through installing boxee on the player, there are better options.
Enter
Western Digital TV -
It hooks up to an HDTV and any external media storage device (including thumb drives) through one of its two usb ports. It plays a rediculous amount of formats:
For video, it supports MPEG-1, MPEG-2, MPEG-4, WMV9, AVI (MPEG-4, Xvid, and AVC), H.264, Matroska (MKV), and MOV (MPEG-4 and H.264). For audio, it supports MP3, WMA, OGG, WAV, PCM, LPCM, AAC, FLAC, Dolby Digital, AIFF, and MKA filesplus PLS, M3U, and WPL playlists. For photos, it supports JPEG, GIF, TIFF, BMG, and PNG. It also works with SRT subtitles.
Even Video_ts folders and .iso!
It has a few drawbacks like no internal storage, no networking capabilities, no firewire (but usb should be fast enough to stream all your HD media @ 480mbit/s) and no option to buy movies online.
But f%$k that, it's $130 and is the perfect thing if you already store your media on an external drive.