Would Apple Tv work with 512 Kb internet speed, or does is require higher speed?

It may well work, but I believe it would be unbearable.

1080p HD movies require a recommended speed of 8 Mbps, 720p HD movies require a recommended speed of 6 Mbps, while SD movies require a recommended speed of 2.5 Mbps.

You could download your content to your computer though and whilst it won't be any quicker it would be significantly more convenient, since your computer doesn't need to redownload content when it's turned off.

As Winston says it would be pretty slow.

As an example it use to take 10-12 hours to download an SD rental to my AppleTV1 when I was on 1 Mbps, so you can probably double that for getting a movie downloaded to iTunes during which time your internet will be tied up.