OK, a couple of points.
The latest version of iTunes is to some extent irrelevant for rentals made direct on AppleTV, if you rent in itunes the rental will appear in one of the itunes menus, if you rent on AppleTV it appears in the top left icons on AppleTV.
Not sure if you rented on AppleTV or itunes.
Netflix works differently.
Netflix adjusts the videdo quality to take account of your internet speed so often works and plays quickly with lower quality on slower connections.
Rentals from iTunes store are fixed quality - either in SD or HD. If you've not altered AppleTV settings and rented there you've probably rented HD.
SD rentals weigh in around 1-1.5GB, HD 3-4GB.
In AppleTV Settings menus there's an itunes store menu that lets you choose if you want HD (default) or SD rentals. Won't work retrospectively for something you've rented.
If you're getting 1.66 Mbps steady rate I'd say it would be 4-6 hours at least for AppleTV2 to load enough of an HD movie to play without interruption while the rest downloads in the background. The problem is that if you do other things with AppleTv in the interim it can flush the download from the AppleTv2 solid state memory requiring the download to start from scratch.
I have a 3-4 Mbps connection currently, it takes 20-30 minutes to start watching HD after renting, under a minute for SD.
For an extra $10 I'd go for the 8 Mbps, but do check your ISPs terms and check they don't throttle usage at certain times or to certain places like itunes - no good having 8 Mbps if they only allow 500MB download between 7pm and 7am before slowing your speed.
With slow internet connections you cannot expect instant rentals from AppleTV 2 (or AppleTV 1). AppleTv 1 had the advantage of having a hard drive that could store a download until it expired regardless of what else you did with the unit. I prefer my AppleTv 1's for renting as i have a slow connection - if i had a fast connection it wouldn't matter unless I had a monthly download cap.
AC