I have XBMC on my ATV2 now and I have to say it's not without problems. Nice interface but a pain to set up, at least in my experience so far. I have a NAS with my iTunes library, ATV2 and XBMC and I cannot for the life of me to get the three to play nice together. The only thing that will play so far is music. Pictures and videos will not.
Hi. I also fount XBMC to be a pain to set up, and the community at XBMC forums isn't very friendly. But, after many days of trying and trying, I found a perfect set up. It has worked perfectly for the last week and a half at least. This is what I found:
1. I found that having my Airdisk formatted to FAT32 was a problem, Airport Extreme seems to have problems with this format. So I used Mac OS Extended (
not journaled), and it has worked flawlessly so far. Before it would randomly disconnect and I would be unable to connect to it from either my Mac or Apple TV.
2. Use SMB to connect from your Apple TV to your NAS. Select add source and then select Windows SMB. After clicking you will see many fields you need to complete. Just introduce your Airport Extreme (router) IP and the name of the disk in the first two fields, leave the rest empty.
If you have an Airport Extreme, just make sure sharing files is enabled and that guests are available to read and write on the disk.
3. 720p and 1080p movies in .m4v format suffer from a buffering issue. So far I've found that 720p mkv files play without a single buffering thru all the movie/tv show. This seems to be a XBMC bug.
This is what I made, and it has worked almost perfectly for a week. I hope it helps.
XBMC -
- files are played locally on the
TV, so you're limited on the types of files you can play reliably.
- everything is handled inside the
TV so no need for a second computer running, except to serve file sharing for the actual media files.
I don't have an

TV, but do use plex as my home media center.
So far I've found that XBMC has problems with HD movies in the .m4v and .avi format. Not when using mkv movies.