Are you sure you have the newest version of Java installed on your Mac? I believe the aTV Flash application was made with the newest Java software. Just run Software Update and see if there is a Java update. If that doesn’t work, just check this as well just to be safe.
Try this, some people have had this problem.
Without any flash drives plugged in go to the Go menu option in Finder and choose Go To Folder…
Type in /Volumes/
You should see your hard drive and any other USB or FireWire drives that are connected. Are there any other folders there that shouldn’t be? I’ve heard that some people had a volume called Patchstick. If you do have a folder called Patchstick so something close to that, put it in the Trash. After putting it in the Trash then plug in a USB stick, format it, and retry the aTV Flash application. aTV relies on the fact that the USB drive is named a speciifc name and if that “Volume” name is already taken, OS X will add a “1” to the end of the USB stick when it is reformatted. Let me know if that is in fact the problem.