If you follow these recently updated instructions everything should go fine. Just be careful to read them thoroughly.
http://wiki.xbmc.org/index.php?title=HOW-TO:Install_XBMC_on_Apple_TV_1_(Linux)
I know that the link says things about XBMC but it is for installing Ubuntu on it so that you can run XBMC too, its a very good media player option. It involves installing Crystalbuntu, a port of Ubuntu with media player options using XBMC.
Here is a nice how to video as well:
http://www.youtube.com/watch?v=RJqyr0QRRvU
I hope that this helps you out.