Will this scenario work?

Im looking to purchase a Time Capsule to use with Time Machine for my MBP.
I will have an external HDD connected to the Time Capsule.
On this external HDD, I have a folder called 'Movies' (where I create backups all my DVD collection so I dont have to keep using the DVDs themselves). These are saved in the DivX format.
I also have various videos taken of the family etc via my HDD Camcorder saved on the external drive. These are saved as .mpg files.
Will I be able to use AppleTV to stream these movies/clips wirelessly onto my TV downstairs?
Do they have to be in a specific format, or a specific named folder etc?

The set up you describe would not work. All content must be in iTunes before it can be played on your tv. You could however convert your current content to meet the tv specifications and add it to itunes, either by adding it to an itunes music folder on your external or TC or by referencing it from either of these locations.
Video requirements are:
H.264 and protected H.264 (from iTunes Store): Up to 5 Mbps, Progressive Main Profile (CAVLC) with AAC-LC audio up to 160 Kbps (maximum resolution: 1280 by 720 pixels at 24 fps, 960 by 540 pixels at 30 fps) in .m4v, .mp4, and .mov file formats
iTunes Store purchased video: 320 by 240 pixels, 640 by 480 pixels, 720 by 480 pixels (anamorphic), or high-definition 720p
MPEG-4: Up to 3 Mbps, Simple Profile with AAC-LC audio up to 160 Kbps (maximum resolution: 720 by 432 pixels at 30 fps) in .m4v, .mp4, and .mov file formats
Audio requirements are:
AAC (16 to 320 Kbps); protected AAC (from iTunes Store); MP3 (16 to 320 Kbps); MP3 VBR; Apple Lossless; AIFF; WAV; Dolby Digital 5.1 surround sound pass-through

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    Message was edited by: PTDiMarzio
    A diagram of what I'd like to have ...
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    |
    --> Time Capsule
    | | |----> various wireless devices
    | |
    | ----> hardwired to MBP for TM use
    |
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    Message was edited by: PTDiMarzio

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