Thank you to the helpful posts here, the Apple TV works again!
24 hrs of learning to probably not update any device until it has been public approved.
Updated to 5.1 yesterday and the wifi connection was flickering on and off, mostly off, even after a 2nd restore and resets. There was never any wifi problems before the update.
Best Buy worker was very nice and tested it, and said the wifi signal never waivered in the store. His best guess was that our router was too old to work with the update. That must be the only explanation for these problems. Although it works with everything else without fail, including os 5.0.2.
I found that a cell phone micro usb cable does work like others said. Make sure you unplug the apple tv power and then plug it back in after it is connected to the computer by the usb, then it will show up in iTunes.
Downloaded the ATV3 os 5.0.2 from above links and it erased, then restored the apple tv os 5.0.2.
The first screen hooked back up to the tv monitor gave the itunes logo and cables freeze, pushed the menu and play buttons together and held to restart.
Then went through the whole process of signing everything back in...24 hrs + later.
Now everything, and WIFI, work perfectly.....just like they did before being prompted to update .......?
So to sum up, we are looking forward to Apple releasing a REAL 5.1 update that works!