I prefer to keep all my videos in iTunes. That way, I can watch them in Front Row, sync them to my iOS devices and watch them on my AppleTV. As I was fed up with the conversions, I purchased ATVflash. Now, I'm thinking of buying VideoDrive (www.aroona.net): it's great to put my videos in iTunes so that they're compatible with the hacked AppleTV. I've tried it with a couple of videos (using method 4) and it works flawlessly. The videos sync and stream from iTunes to my AppleTV, all without any conversions.
As Videodrive also adds descriptions and covers, I think this is a great setup, but I was wondering if others also have a good experience with this software. Is it always compatible with ATVflash?