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Filesize isn't as much of an issue as bitrate... As long as your .mp4 doesn't exceed 5Mbps, :apple:tv shouldn't have problems.

With regard to filesize, the only limitation is that files larger than 4GB are a little persnickety in iTunes. Keep the filesize below 4 gigs, and you'll have no problems adding poster artwork, and importing to iTunes/syncing to :apple:tv.

I have done a lot of 720p mkv conversions for my :apple:tv in Visual Hub. I always use the AppleTV, Go Nuts setting, but in the advanced window, I tell it to constrain to a filesize of 4290 MB (through trial and error). Doing this always yields a filesize of 3.99 gigs, so I have room to import into iTunes and add hi-res poster artwork.
 
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