The 160gb is really only a good option if you will never need more than 160GB of space. Considering the limitless future of the Apple TV and peoples tendency to make their libraries bigger and never get rid of anything, that seems like a stretch.
Personally, I believe the 40GB is a much more economical choice as you can stream now (or always), with the option to upgrade the hard drive to a size of your choosing at a less expensive price, or even move to external storage if you wish.
Obviously, if your library is already 160GB+ the choice is clear.