Review: Apple TV Page 2
As far as audio quality goes, since it's just a straight digital output from Apple TV, you're beholden to the DACs in your receiver - and to the quality of your audio files. That is to say, compressed audio doesn't sound great, and Apple TV doesn't do anything to help with that. But if you have higher-resolution files, such as AIFF, Apple Lossless, WAV, and a few others, Apple TV can stream those as well.
Of course, all is not perfect with Apple TV. For one, video output is only 720p. However, this matches the max resolution for high-def content on iTunes and Netflix, so that isn't really an issue. (High-def from both iTunes and Netflix looked fine on my 100-inch projection screen. If your screen is any smaller than that, it's doubtful that you're going to miss the lack of 1080i/1080p.) Depending on the quality of your TV or receiver's video scaling, you may not notice a difference in picture quality between Apple TV and the output of a good Blu-ray player when watching Netflix content. But if the scaler in your TV isn't that good, then standard-def programs will seem a little soft. In other words, the scaling performance of Apple's A4 chip is passable, but by no means great.
I found an odd bug with Apple TV when trying to stream photos from my PC to use as a screen saver . I told it to use the Pictures folder, which has about 90 folders and 12,000-plus images from various vacations and such. For some reason, the Random function would only ever pull images from the first and fourth folders. That's it. So as far as the Apple TV is concerned, I only have pictures of my Porsche 914 and Berlin/Prague 2007. I couldn't find a workaround.
Lastly, using the Apple TV interface, all you can do is rent movies, not purchase them. There is an 8 GB flash drive inside (and 256 MB of RAM), but this is just for caching content. So iTunes movies or TV shows that aren't available for rental don't even show up in the search. This is also true of Netflix, which is unfortunate as the Netflix interface on the PS3 and some other devices allows you to add a movie/TV show to your disc queue even when it's not available for streaming. So you'll still need your computer if you want to add discs via Netflix or purchase movies/TV shows via iTunes. Once purchased and downloaded to your computer, you can stream them to Apple TV no problem.
Despite my enthusiasm for Apple TV, the question remains of how it will compare to Google TV, in whatever form that takes. We shall see. In the meantime, I really can't think of a reason why someone shouldn't buy an Apple TV. It's so cheap, and it does all its functions so well. It's simply a fantastic product.