HLS (.movpkg, Apple low latency fragmented MP4 specification) is not a video format; it is a container format, and HLS is supported by Apple TV 4K. It is how you get streams from Apple’s servers. The video format is still H.264 AVC or H.265 HEVC.
HLS is unfortunately not supported for Home Sharing at this time. You can give feedback to Apple that users want this for their iTunes Store downloads. It does not appear to be an Apple TV issue per se: Home Sharing to iPhone or iPad also doesn’t list these HLS downloads: I believe it is already excluded for Home Sharing on the Mac.
Previously (in macOS Catalina 10.15) users could de-select HDR, and select Most Compatible, and simplify the audio options, to force M4V file downloads. That former option (HDR) is no longer available in Big Sur or Monterey. You can give feedback to Apple that users want M4V download options.