Does Apple TV Cache What It Streams?

My TV Shows and movies that I encoded at 1900kbps skip so much that they're unwatchable. Even if I press pause for several seconds they will continue to skip after I press play again, which leads me to believe AppleTV is not caching what it streams. I have a wireless g network and tested this with nothing running on my iMac and nothing running on the network.
I thought fine, I'll go buy an Airport N, but that would be pointless because my iMac can only stream G.
My library is 200gb so what's a boy to do?

Not necessarily. Remember that each device is talking to the access point independently of the other. The problem might well be the quality of the connection between the Apple TV and the access point. Also, depending on your physical layout, you might be able to use a wired connection with either your iMac or Apple TV.
Another option is Ethernet over power lines. I'm using the Netgear HDX 101 with my Apple TV so that I don't have to worry about wireless performance.
Also, are you sure that you are not having interference problems with your wireless network. While there are lots of channels, only 1, 6, and 11 don't overlap so you want to use the one with the least interference from neighbors.

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least ten seconds, until the Apple logo appears.
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Does Apple TV Cache What It Streams?

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