Sorry I disagree, but in some ways you may be talking about the same thing.
AppleTV effectively downloads the whole movie to a large buffer and allows playback when it calculates the rest can follow as you watch without interrupting playback. This 'buffer' resides not in primary RAM but solid state storage.
Whether I call this a large buffer or a download is largely semantics, but the unit will effectively buffer the whole movie start to finish as you watch, allowing you to rewind quickly the protion already played on a slower connection.
The issue is that it flushes this downloaded portion/buffer quite unpredictably if you pause and do something else or finish and decide to watch again. Apple erroneosuly assume everyone has unlimited data plans and adequate bandwidth for instant playback, and this completely messes up the experience for those with slower connections - forcing the unit to reload the whole thing to that point just because you've paused and done something else is plain daft and incredibly wasteful of internet bandwidth, and potentially expensive for those on limited plans.
Streaming of iTunes content is not rate adaptive - the rentals/purchases are fixed size files.
When you say:
"atv could very easily keep the critical bits in memory getting the next critical bits to display is easy"
this is why I feel we may all be esssentially saying the same thing - it could keep the portion buffered alive but just loses it without warning, and unless watching another iTunes movie I would suggest quite without need.
AC