A couple of hardware enthusiasts claim that they officially got the Xvid and everything else supported by Perian working on the Apple TV. It's supposed to be 100 percent legit, involving only personally taking apart your Apple TV, and plugging in the drive - it's a straightforward OS X 10.4.7 install.

Awkward and Sabretooth relates the methods as such:

1. Open it up (4 screws on the bottom, small Torx bit)
2. Put the 2.5" drive into a USB enclosure or whatever you want
3. Mount the HFS filesystem
4. Install Perian in /Library/Quicktime (as you normally would)
5. Install Dropbear (or enable SSH if you know how... we gave up and used Dropbear)
6. Add a startup script to disable the firewall or open up the ports you need for SSH
7. Put the drive back in and boot it, ssh login as frontrow, password frontrow (or add an ssh key for yourself)
8. Use a reference movie (use QT Pro to save a reference movie) to bootstrap your xvid file

Make sure to see more details about this before you go about tweaking with the Apple TV for Xvid.