Apple TV as movie server?

I am looking for a solution for my dvd movie collection.
I backup my movies and burn dvds, but these can get scratched and I'm looking for a better option.
I have read that some people use a mac mini as a movie server, but thought that might be overkill for what I need, and too expensive.
here are my requirements:
1-play movies, probably from a 1TB external hard drive.
2-I'd prefer having these files saved at a high enough quality to burn a dvd backup, a single 4.7gb back up disc is sufficient per movie.
Is this a viable option?

atv will mirror everything in the itunes lib
it's set to sync so it's already in your itunes lib
where you can burn a dvd if itunes support that
otherwise some other program does i'd asume
but if you delete it from itunes to save space on your
hd atv will also delete it
unless you just delete the file itself
and keep the itunes ref
but then you cant get the media back from the atv
best way if you want to do it is to hook up a ext hd and keep the media on that
and just have links to it in itunes
and computers which are just set to stream with atv cant really do anything with the atv but the atv can access the media in the stream computer while it's on

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