Another big difference between the ATV1 and ATV2 is that you can download podcasts directly to the ATV1's built-in hard drive. In fact, you can queue multiple podcasts and just let them download overnight or while at work. Of course, you can do the same with iTunes on your Mac/PC (or even better, by using a subscription within iTunes) but I like the option of just downloading directly to my ATV1 since my Mac is generally turned off or in sleep mode unless I'm actively using it.
Another thing, the ATV1 supports 1080p HDMI and 1080i component outputs (scaled up from the max supported 720p24 content) while the ATV2 is limited to 720p output over HDMI (regardless of the content resolution, but which is official supported to 720p30, although 1080p content will play on the ATV2 but not on the ATV1).
It was mentioned earlier that the ATV2 has a "faster processor" than the ATV1 but that isn't exactly true. The 1GHz Pentium-class processor in the ATV1 is actually faster than the Apple A4 used in the ATV2 (just check the Geekbench results, the Pentium in the ATV1 is nearly 50% "faster" than the A4). Here is a link which discusses these performance differences:
https://forums.macrumors.com/showthread.php?p=11239740
However, the ATV2 has better support for hardware video decoding which is probably because it is using a more modern GPU (as well as a graphics-optimized iOS interface). The ATV2 also uses flash memory for storage, which offers much faster random access than does the ATV1's hard drive. The net result from these two changes/differences is that the ATV2 just seems more responsive and because of its better hardware-assisted video decoding the ATV2 can handle higher resolution content (720p30 versus the 720p24 limit on the ATV1).
In any case, both are good products and $40 for a well-functioning ATV1 is an absolute steal.
Another thing, the ATV1 supports 1080p HDMI and 1080i component outputs (scaled up from the max supported 720p24 content) while the ATV2 is limited to 720p output over HDMI (regardless of the content resolution, but which is official supported to 720p30, although 1080p content will play on the ATV2 but not on the ATV1).
It was mentioned earlier that the ATV2 has a "faster processor" than the ATV1 but that isn't exactly true. The 1GHz Pentium-class processor in the ATV1 is actually faster than the Apple A4 used in the ATV2 (just check the Geekbench results, the Pentium in the ATV1 is nearly 50% "faster" than the A4). Here is a link which discusses these performance differences:
https://forums.macrumors.com/showthread.php?p=11239740
However, the ATV2 has better support for hardware video decoding which is probably because it is using a more modern GPU (as well as a graphics-optimized iOS interface). The ATV2 also uses flash memory for storage, which offers much faster random access than does the ATV1's hard drive. The net result from these two changes/differences is that the ATV2 just seems more responsive and because of its better hardware-assisted video decoding the ATV2 can handle higher resolution content (720p30 versus the 720p24 limit on the ATV1).
In any case, both are good products and $40 for a well-functioning ATV1 is an absolute steal.