I used AppleCoreLLC patch software
It cost $40 to download but was super easy and installed a bunch of plugins, etc automatically... the only thing I had to download myself was Fugue (SFTP client - secure ftp). Search for AppleCoreLLC. You'll need a 500MB or 1GB USB flash drive to do the install.
Once that is done you'll have an aTV that will play any movies (except MKV files which will still have to be re-ripped), you can hook it up to a UPNP media server like EyeTV or similar.. and it will stream movies to the aTV for you, any format (again MKV works but it chokes on it... so audio/video gets out of sync).
You'll also be able to auto-install emulators for NES, SNES, Sega and others to play ROM files... some additonal steps needed to hook up with your keyboard... in any case you'll want to read a bunch of tutorials and things at some point to really know what you've got available and what works and doesn't work on aTV 2.0 software (lots of stuff was done for 1.0 but hasn't been updated for 2 yet or maybe never will be)...
Hmmm it installs a web browser as well but I hear the best option is to get Firefox working... haven't done that myself as yet.
Good luck. I'm pretty happy with my hacked aTV so far but haven't really gone the extra mile with a mounted USB drive as yet and still have lots of 'plugins' and other software to install - but I've had no real problems following the instructions found on line for most things. I paid the money just because I wanted to see if it would be what I hoped for without having to jump through hoops and spend 10 hours messing with it.