Here's what you need on-hand:
A mini. Nearly any vintage will doya (an Intel Mac mini with a remote is your best bet!).
A TV. A TV that accepts HDMI, DVI or VGA input probably is easiest, but you can even connect to an old style composite TV. (In this, a mini is way easier to hook up than an Apple TV with all its fussy component/HDMI insistence).
A cable. My mini has a DVI video out port. It also shipped with a DVI-to-VGA adapter. Behold eBay, the source for all things cheap and cable. Just google around until you find a connector that goes from either DVI or VGA into the kind of input supported by your TV. I paid about $12 (shipped) for a DVI-to-HDMI cable. You can buy a VGA-to-RCA cable for about $5 (shipped). (At one point, I also stole a VGA-to-VGA cable from my husband's computer, but as this left him without a working monitor, he was not amused).
Once you have your proper cable on-hand (and getting the right one is the trickiest part of this entire project), you just connect the mini to your TV and use it as your monitor. Voila! Instant AppleMiniTV.
As for playback, make sure you've installed Perian and Flip4Mac so you support as many formats as possible and either fork out the $29 for QuickTime Pro for full-screen playback or use one of the many, many QT FullScreen hacks available on the net (like this one). Remember that Front Row is also an option.
- You save the cost of an Apple TV (almost $300) using a mini you already have on-hand. You are only out the cost of a cable. (eBay! eBay! eBay!)
- If your mini has wireless abilities (and it probably does), you can connect wirelessly to other computers on your network and play back content from them. Without Apple TV!
- You can play back a lot more formats than Apple TV.
- No silliness about "up to five authorized machines".
- You can even surf the net on your TV. And do Google and all of that other stuff.
- No useless little "Apple Remote". You've got an entire keyboard and mouse to command your mini. That's Power computing!
 Unless you want to use the Apple Remote with your mini. In which case, use Front Row to watch your videos and if needed, create QuickTime reference movies for your not-normally-Front-Row-friendly formats like DivX. You'll need QuickTime Pro. Open the movie in QT. Save it as a reference movie. Open the reference movie in iTunes.