1) It takes forever.
2) Quality is degraded.
Just get one of these wdtv units.
Sure it has no ethernet port.
But It is easily hackable to use a USB ethernet.
And it plays all these ripped formats mkv, m2ts, etc. at 1080p. No loss in video quality.
1) Takes only a bit longer than a standard DVD encode for me on my 3.06 Ghz iMac. Maybe if you are using a G4 processor, or an older CoreDuo, sure. With a newer machine, its not a time issue at all.
2) Quality is fantastic over DVD-encode at an increase of only a gig or so per movie. Sound quality is superb with AC3 pass-thru. On my 1080i/720p plasma the difference is night and day.
Why would anyone encode blu to appletv? For starters, I really don't feel like rebuying new physical media for all the movies I already have. I know legally it has no grounding, but I've paid for all this once, why do I need to keep paying for it every time a new media format is released? F-that.
I'm also past keeping physical media around and having to swap out discs, etc. It is much easier to just scroll through the list of movies and click on whatever one I want to start. Will I keep media around for some movies? Sure, most likely when I have the money to be able pick up a full, 120hz 1080p set. Not happening any time soon, I also don't want to buy a $200+ player just to view them.
Just because -you- don't see the value in converting blu-rays for use on the AppleTV doesn't mean there isn't any value for others.