I've been converting my DVD collection for about 2 months now and couldn't be happier with the setup I chose. I do still have about 150 DVD's to go, but this is what I have so far.
I am using an older Mac Mini with a Drobo attached. Just recently had to add an additional 1TB drive to the Drobo which exhaustingly took almost 3 minutes to install and the Drobo to recognize the storage space.
The Mac Mini is connected via ethernet to a Time Machine which then serves the 3 aTVs (2 wireless N, 1 ethernet), I do not notice the difference in connection speeds. All have a slight lag to get the movie going, but once it is running there have never been a problem.
I use the Linksys router connected to the cable modem to handle all G speed traffic in the house and only my Macbook Pro and my wife's Macbook use the Time Machine for backup.
I really like the use of the Mac Mini, because it can sit on the shelf without monitor, etc connected out of the way in my home office, but could easily be put anywhere. I use screen sharing to connect and manage the iTunes library as well as the shared iPhoto library.