I've already spent like 140.00 dollars on the HD movies available on itunes.. I know, I'm a loser. But, hey! I like the quality. I bought several of them on appletv, which then syncs back to your itunes library, and yes you get the HD and SD versions (SD to put on your ipod/iphone). I think the picture quality is very good, and I have done comparisons with bluerays of the same movies. Basically, I think there is about a 10% decrease in sharpness and colors when using appletv, but that doesn't bother me, compared to the price and convenience of not having some stupid disc lying around taking up my apartments space. Plus you don't have to sit there for 15 minutes to ffw through commercials, advertisements and movie previews,then deal with some stupid menu system just to watch the movie.
Lastly, if you purchase the HD version off of your computer (itunes), then it will sync to your appletv (HD version will play depending on your setup).
I can't wait to see what HD movies they release next, I'm addicted and very happy with my experiences so far with the picture quality. The only thing missing? The subtitles.. but I think you can add your own in with muxo??
Mo