Okay so I got it today. I was happy. .MKVs don't work. It goes into the software but nothing encodes, so I confirmed its not supported.
My computer is an imac 2.66 with 4 gb memory.
My test is a 720p .ts file to .m4v 720p for appletv (best settings I could find). I admit the settings in the program are a little odd, but I choosed the appletv preset at 150% quality.
The movie was played on my appletv hooked up via hdmi to 42" panny plasma at 1080i.
The file was about 5gb big, and per the quicktime movie info, about 4800 kbps data rate.
And drum roll...
Quality sucked. It was pixely, with macroblocks everywhere, looked like a dvd, and also suttered immensly. I couldn't even watch it. I don't know if it was the wrong setting or something. Speed was definately on the side of the device though, took less than 80 minutes for a full 2 hr 30 min movie.
So am I impressed so far.. no
Is it worth 145 dollars? no
Will I keep messing with it? Yes, then I'll get bored.
Will keep you updated, trying a high def trailer from apple website and converting it to 720p for appletv
Hopefully will change.. though i doubt it. Looks like I'm sticking with handbrake.. sigh..
Mo