Followed up w Apple support re: Apple TV. Told out of warranty period on TV (>1year) but on an exceptional basis... Come on apple, it was your update that screwed things up so don't start messing about. We accept updates in good faith and it isn't as if I could roll back the update myself. Any way, "on an exceptional basis" I was talked thro resetting the apple tv (already tried, didn't work) before agreeing the "issue" was with the laptop. Tried setting up a new admin user and loggin back on in to sys prefs>icloud. Didn't work. Talked about changing country in itunes account, but with itunes matching this would cost. Also talked about whether upgrade to mountain lion would resolve but agan a cost to user and no guarrantee problem goes away.
In the end apple support escalated problem and promised to get back to me. I also set up an appointment to go to the local store genius bar.
6 days later having not heard back from apple support, went in to the store. Talked through the issue. Switched on computer and up popped the icloud terms & conditions straight away in sys pref. Have they released a patch to lion? Not sure. Don't know why the problem has resolved but it has. Let me know if it's gone away for you too.