The problem is the Macbook Air will not start an Airplay connection with the AppleTV. The Airplay Mirroring attempts to start on the MAcbook Air and then after 20 - 30 seconds it goes back to a blue screen and rescales back to the Macbook Airs native resolution. My AppleTV and 3 month old Macbook Air(10.8.3) are both up to date with all software updates. I have even restarted my Airport Express
Also, the "sound output" in system preferences will not allow me to select Airplay as a source for audio.
Airplay and AppleTV are working with all iOS devices.
Airplay worked prior to the update to 10.8.3.