Prior to my Apple TV 2 I was accessing Netflix with a Roku HD. There would be times, usually during peak traffic hours, that the Roku would rebuffer to a lower quality video stream; sometimes very low quality. By doing so, the movie wouldn't freeze.
When I moved to the Apple TV, I started noticing freezing issues within a few hours. This was very annoying. I tried both wireless and wired connections with no change. I attempted to change DNS servers; nothing. I tried updating firmware; even hacking the box; again, nothing. I figured that my 7mbps DSL service was plenty to stream a movie without any issues, but my DSL provider informed me that they could upgrade me to 12mbps service for only a few dollars extra and I'd get a new modem with 802.11N to boot.
The modem showed up last Friday night. Even though the DSL upgrade wasn't scheduled to go into affect until Saturday morning, I decided to set up the new modem. I didn't run into any freezing issues on Friday night. Saturday after being upgraded, I also ran into no freezing issues. It wasn't until Sunday night that a movie started to freeze up every 3-4 minutes. I ran a couple DSL speed tests and they all showed between 10.9 and 11.5mbps download speeds. Later that evening, I started the same movie over and did not run into one freezing issue.
Even though the Apple TV freezes on occasion, I have never seen it rebuffer to a lower video quality stream; it always serves a very crisp image. It is my guess that this freezing is related to the load put on certain Netflix servers during high traffic viewing times and the Apple TV's stubbornness to serve a high-quality video stream. My thoughts are that if Apple tweaked the Apple TV to rebuffer lower-quality stream, we would not see this freezing issue, but would instead be served steady, lower-quality streams.