It depends on what codecs you have isntalled. for isntance, if you have a divx with ac3 audio, quicktime will not convert the audio when you export the movie to ATV (I'm referring to Quicktime Pro here). So you need to make sure that whatever you use, you have the correct codecs. You will also need to import them into iTunes as this is where ATV gets its sources from.
I use quicktime pro for my divx and avi files and the output is fine on a 37" plasma.