The good folks at AppleTVHacks just released a way to use an external drive via USB for additional storage. Here comes the 1TB AppleTV! So here’s the high-level summary, the AppleTV hack allows the system to boot normally from the internal drive of the AppleTV then allows for digital content to be stored, pulled and played from an external drive. Unfortunately this AppleTV hack is only working on Max OSX at the moment, but a community call to action has been made to incorporate this hack to support other opperating systems. Ahh, how nice.
If interested visit the other side of this link for all the gritty detail.