I really believe it is an issue with the new software update. I have been on the phone with Apple three times now. Prior to the update, any netflix show started within 15 seconds. After the update last Tuesday night, it takes about 10-15 minutes to start. Nothing else has changed. My DSL speed is timed at 2.54 mb/s. The Apple supervisor said that I need at least 5 mb/s to have netflix work, and they will not even bring the issue to the software engineers unless I had at least that speed, because I have not met the minimum specifications. When I told them it worked perfectly for three weeks prior to the update, but now it doesn't, they had no answer. I have a wii on the same network, and it will start streaming the exact same episode within 10 seconds that takes the Appletv 15 minutes to load.
My theory as to what has happened: I think netflix is no longer able to downgrade the transmission to fit with your particular download speed. On all my other devices, (wii, computer, laptop, etc) it seems that netflix first determines your speed and adjusts the video quality accordingly to match your speed so buffering does not take too long ( I assume this is through lower resolution or higher compression) The fact that the appletv still works, but takes forever to buffer and start, seems to indicate that netflix is sending a full hd resolution program regardless of my download speed. It may well be the case that I needed at least 5 mb/s to stream full hd resolution, and that is why my performance now seems so slow. If something in the new software update screwed up the netflix ability to determine your download speed, that could explain what has happened to me anyway.
I have just ordered a higher DSL speed which should be available to me in the next few days. If it starts working well with the 6 mb/s speed, I will be happy. If it doesn't work, I will call Apple back and finally be able to escalate the issue.
By the way, I did all of the usual checks of my network, router, dsl modem and did both a reset and restore, etc. prior to even getting to second level of support at Apple.