I've had the same problem. I just did a factory reset, and it seems better now. We'll see. APple MUST stop giving us the old line about interference when youtube and the trailers work fine. It's an itunes problem, most likely.
No, Apple is probably 100% correct in their assessment. It usually IS interference that causes them to get dropped from what I've experienced personally with my own two Apple TV units. The PROBLEM, though is iTunes. That is to say, the reason it will connect to YouTube and even the iTunes Store is that that those connections are restored shortly after the interference ends. iTunes, however, will usually NOT reconnect to an Apple TV device on its own once it's dropped it. So what happens, you get some kind of interference that temporarily breaks your connection in iTunes (iTunes thinks the device is gone) and then when the interference stops, the AppleTV reconnects to the wireless router, but iTunes just sits there and doesn't try to find the device again. iTunes only seems to do an active search for Apple TV units when it's first started. After that, it couldn't care less unless the Apple TV unit signals it. You can verify this behavior from either end.
For example, after you've lost the Apple TV unit, try resetting your Apple TV and see if it magically reconnects (a hacked unit only requires the finder to be restarted from the main menu to accomplish the same thing). Now the next time it happens, instead try quitting iTunes and restarting it and see if the Apple TV doesn't magically reappear again. Usually either one of these methods will get it to reappear. You can also select in iTunes preferences to not look for Apple TV units and then hit OK and then go back and tell it to look for them again and it will then magically find the unit again without quitting or resetting the Apple TV unit.
Apple could possibly largely fix this problem by having iTunes actively search like it does on startup for Apple TV units once a minute or so. But like most problems, they neither acknowledge it even exists or attempt to fix it.
But the fundamental problem is the same, regardless. Your wireless connection is being interrupted for a reason. Very short interruptions don't appear to cause this. If I use my Airport Express, for example, Apple TV functions normally most of the time. However, I know there is interference because if I run XBMC, the video loads tend to stutter quite often (whereas Apple's own interface seem to buffer it better). If I use my NetGear router, XBMC runs perfectly fine and Apple's own interface loads movies faster, etc. (you can test this by sending/syncing a test file to the unit while observing from the Activity Monitor on your Mac and you'll see exactly how throughput behaves in real time).
The long term solution (without any changes from iTunes) remains the same. You need a better connection to the unit. This can often be as simple as changing the channel you're broadcasting on to the unit (5GHz is LESS reliable here in that regard for me, which goes contrary to most recommendations, for example). You might also try moving the router around the room or to a different room, if possible. In my case, a different brand router worked MUCH better (i.e. Netgear) than Apple's own Airport Express. But getting a reliable connection with as little interference as possible is the key to a reliable Apple TV connection. With the Airport Express, it was dropping all the time. I experimented with the Airport Utility, manually changing channels while watching the units with the monitor mode and I could plainly see within a few minutes which channels got the best connection by the transfer rates being stable. By switching to the most reliable channel, my Apple TV units stopped getting dropped. It was night and day so that's how I know Apple is correct about interference and the Airport Utility made it very obvious to see by watching the monitor mode across channels. But even then, XBMC wasn't fully stable until I used a different router altogether (I have two anyway). But generally speaking, the channel information was correct there as well. Some were more reliable than others. It's also sitting in a different location in the same room.
Basically, if you get your wireless network stable, the Apple TV issue with dropping from iTunes will just disappear. The reason updates from Apple can affect it probably has to do with how well it works with their own network products. Gaging by how poorly the Airport Express does compared to the Netgear unit I have with large file transfers (i.e. movies over wireless) when running XMBC on the Apple TV, I can only conclude that Apple networking products aren't all that great. I've read endless complaints about Airport connection problems over the past few years since buying a Mac. Clearly, there are times when buying from Apple isn't the best choice.
TV's I had this problem, but I have a head injury from Iraq, and cannot for the life of me recall how I fixed it.
