I must admit that the success of the Apple TV has taken even me by surprise. Even before the unit shipped I noticed quite a groundswell of negativity. I understand many of the reservations that some have. The Apple TV won't play every codec known to mankind (without help) but it seems to be able to play many out of the box without a little work. I plan to get one primarily because I want to have a centralized store of music and videos and photos. If I could consolidate everything to one large multi-terabyte NAS device with easy access from my "client" software I'd be happy with that. My hope is that Apple will eventually allow this somehow. That all your media reside in one area (appropriately backed up via Time Machine of course) yet each client software like iTunes/iPhoto manage the metadata at the client level as well. Then the Apple TV could just be pointed at this media server most of the time and if you wanted to stream some data that wasn't on the media server you'd of course have that option as well.
I think the Apple TV is presenting more value via extensibility. It took less than 24 hours to find out that the Apple TV drive could be removed and the Quicktime partition accessed to add Perian a program that enables Quicktime to playback more codec. Upgrading the hard drive is proving even easier. The 40GB hard drive is going to be fine for many but the larger your hard drive is the more local content you can stuff on the Apple TV. I guess this defeats my aforementioned Media Server concept as the Apple TV would in essence become your server. We'll see how that pans out in the future.
Eventually I see Apple offering 720p HD downloads which will improve the picture quality of the offered movies greatly. It has been confirmed that the Apple TV is in fact running a flavor of OS X so I expect evolution to happen in this area as well. Who knows there might be a Apple TV running Leopard in the near future. Time will tell.
Here's a site where you can track some of the "hacks" to improve your Apple TV. The appropriately named Apple TV Hacker ran by Mike Curtis. The program that allows you to run more codec in Quicktime is Perian.