Streaming works just fine, even on an older wireless set up like "g". For example, I have my 40GB generation on ATV set to sync with my MBP just to keep some media on the ATV if the network fails. A also have it set to stream from my old Mac Mini which has an external HDD attached. That's where the bulk of my video lives. I've never had any issues streaming the video, even HD content, wirelessly to it. The Mini has a wireless "g" card in it and work very well. Look at the bit rate of your video media. I'd imagine it's far less than 1MB and thus well below what your wireless card or wired connection is capable of sending. As far as syncing more that 40GB of media (the 40GB ATV holds like 30GB+) - there are settings on the ATV to prioritize what get's synced first. For example, I have my photos and music sync first, and then let the ATV fill whatever space that is left with the newest items in my video media library. Hope that helps.
-Dave