apple Tv 2nd GEn can't sign in with apple ID, can't purchase or rent movie.

You say you changed your password through '.me'

MobileMe logins and passwords are usually different to iTunes Store accounts. I guess you could use your mobileme login name as an AppleID for iTunes (including the @me.com) but the passwords would be different wouldn't they? Unless you used the same one of course. I may be wrong but my iTunes ID predates my me.com account by some years so I've not changed it.

Are you using the correct credentials?

Are you set to the correct country on AppleTV?

Can you access rental previews/YouTube etc? i.e. are you connected to internet?

For .me.com login on AppleTV you don't use the @me.com bit only the name in front of it, for photo galleries etc, but your iTunes account ID will be a full e-mail type name including the @me.com bit.

Go to iTunes on your computer and do the password recovery thing to make sure you are using the correct password.

Same problem here - brand new 2nd gen Apple TV. Can not sign on to iTunes through Home Sharing or Network test screens (password or login name is incorrect). Updated to 4.1.1 using network so connectivity is fine. Username and password for iTunes verified correct but Apple TV can not sign on. Home Sharing enabled on local PC using same iTunes sign on but Apple TV can not find.

Compared to 1st gen Apple TV, this is a major disappointment.

I have the same problem, has anyone found a solution?

I just experienced the EXACT same problem. I purchased an Apple TV for my parents and at first the set-up seemed very user friendly. I had created a new Itunes account for them and also a Netflix account. I followed the directions exactly and when it came to the Home Sharing, it wouldn't accept their Apple ID. I went through step by step to give them a new password, and that didn't work either. This is insane and filling me with the most incredible rage!

Experiencing similar issues.

MobileMe isn't being recognised at all.
I have an Apple ID for iTunes and the all works fine. But if I try to connect to my MobileMe for screen saver, pictures or Movies, my MobileMe user isn't recognised.

All my other devices, email etc connect fine.