that's good news the're working on it... if it's failing to play locally stored contents and it works fine when not connected to internet it's probaby something related to the connection with itunes store, that is, apple tv is using all available resources trying to connect with itunes store (all cpu).... that's why we can't even access trailers anymore.. that's why it keeps refreshing the icons, just like it's not working properly.
I have mine for 7 years now, it has been worth any cent I've paid for it.
I sincerely don't believe apple would deliberately cut 1st generation users from itunes store.... makes no sense, eventually everyone will want to upgrade to 3rd or 4th gen (whatever) to get access to other contents...
today is another holiday in Brazil so it's the 4th day without access to itunes... fortunately my girlfriend has a 3rd generation, so it wasn't so bad at all...😉... I've just tried, still not working, but I'm pretty sure it will come back soon!