I opted for the 40GB. I did a little research and most whose libraries were going over the 160gb were resigned to streaming anyway (which requires you keep your Mac on). I always have my Mac on, so that wasn't an issue either. Plus, I found a good deal on a new 40gb -- $210 shipped.
I'm not sure which of the features appealed most to me. I have a TiVo HD and PS3, but I'm thinking the AppleTV will fill the void not filled by those devices. In particular, online rentals and streaming my iTunes videos. I forget the blog, but found a good write up of someone with a similar setup. My biggest complaint about AppleTV was the lack of HD. Take Two seems to address that with HD rentals.
Ordered from CA, so should be a week or so before it arrives.