We got some good time in with Apple's take 2 (i.e. v2.0) software update at Macworld this year, but now that it's out we had to put the spurs to it. We'll be updating with more as we go, but for right now here's what you need to know:
The update itself is under 200MB and took us under five minutes to download, but over ten minutes to install. Our first try failed out. Also, get used to seeing that loading bar screen, it cycled through about five times for us.
Our HD movie was ready for playback within a minute of starting the download. Very nice.
Picture quality is pretty good. Not amazing, but pretty good.
Flickr integration works well (unlike on stage at Macworld), but there's no way to aggregate your contact lists's photos to your ATV. It's on a single contact basis only, meaning you can only look at your own or any one other user's photos at a time. Kind of a bummer in that regard.