The constant-height Custom Anamorphic setting is used to maximise vertical resolution for playback on devices that support greater than 720p output (e.g. Mac/PC, ATV1, ATV3?, any other media player) while maintaining broad ATV compatibility.
the ATV1 didn't support greater than 720p, although it did upscale (apparently).
i had 2 ATV1's, and now 2 ATV2's.