Apple TV with USB HD

i am thinking about getting an apple tv. I have a lot of dvds that are taking up a lot of space. my plan is to convert them to h.264 and store them on an external hd. i was told the apple tv will support an external usb hd by an apple store employee... is this true?

You will need to Google for NitoTV, a hack to allow that to occur. ATV does NOT natively support a HDD plugged into it's USB port. You can however stream media from an external HDD connected to ANOTHER Mac by USB natively via your network.

let me ask this... if i get a 40gig apple tv, but i have more than 40gigs of media on my macbook, will it stream it? i know what "sync" means, but how will it work if i sync the apple tv and my macbook when it has more media than the apple tv?

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

yes, that info helps. ive asked the apple geniuses at my local apple store, and they sometimes tend to give me bad info.

one last question, i have some dvds of tv shows i encoded to H.264 format to go into itunes, will the apple tv display these shows in 720p when played on my tv?

It should. I know that my generation one ATV will display HD content on my 37" Visio LCD. The ATV is certainly capable of that as long as the TV is capable.
-Dave

one last question for everybody... when i'm converting my dvds and moving them from my hard drive to an external drive, working with sometimes large files, will i ever need to defrag my macbook? i know os x isn't as bad as windows when it comes to disc fragmentation, but what about in this case??