Ok, I'm gonna lay out the obvious here for the sake of being concise.
The AppleTV 2 has A4 chip
The iPad 1 has A4 chip
The iPad 2 has A5 chip
The AppleTV can only output at 720p
The hdmi adaptor works with iPad 1 but only at 720p
The hdmi adator works for iPad 2 at 1080p
Therefore, AppleTV 3 will have A5 chip and be able to output at 1080p
It will be so powerful in fact I think some major improvements will come.
In the photo booth and iMovie apps the power of A5 really shined with all the simultaneous video playing and editing being done, and this could translate well to AppleTV 3 for many things..
If you read the specs on the HDMI adapter, while the iPad 2 can "output" 1080p, it can only do that while mirroring. When you play a movie, it will output at 720p.
And, mirroring is only available on iPad 2, not on the older devices.
So it looks like when plugged into older devices, it acts exactly the same as the VGA, composite, or component adapters. It outputs movies and photo slideshows while they are playing, and that's it. Hopefully the 720p limitation for movies on iPad 2 means that it plays them at full-screen, no goofy displaying only the aspect ratio of the iPad...
But as others have mentioned, even outputting at "1080p", when you're mirroring a 1024x768 screen, you're still only mirroring a 1024x768 image.
If you watch the iPad 2 videos, it even appears that there are 'pictureframe' borders around the mirrored image. So it appears that when you're in portrait mode, it likely outputs a pixel-perfect 768x1024 image onto that 1920x1080 screen, so not only do you lose nearly 2/3 of the width, but you lose 56 vertical pixels (whooptie-freakin'-doo...)
In landscape, you still only get 4x3 ratio, although it is obviously doing more than a 1:1 pixel map.