Cable hook up question

To begin, I hooked up my Apple TV 2 by USB cable with my Mac. I double clicked the the SeasonPass app and it began to download. When I was done, it said to hook up the USB cable. I’m already hooked up!

I held down the menu and play buttons on the Apple Remote for 7 seconds. It began extracting the software, but never connected to iTunes.

When I was done (it took a long time), I hooked the Apple TV to the TV. The SeasonPass app icon shows up on the startup screen. I click the red SeasonPass, select the wifi, but the password is rejected.

I went into Airport Utility and reset the user name and password for the Time Capsule, but it still does not connect. I unplugged the device, plugged it back in but still does not connect.

I feel like I really screwed things up. Can someone tell me what I am doing wrong?