Worked: Transcend JetFlash V30 1GB USB 2.0 Flash Drive (purchased at Target on 9/14/08) - I did use disk utility to "erase" the flash drive & used "Mac OS Extended" format. Do not name your new flash drive "aTV Flash" because you'll be confused when you try to choose it as your drive. The disk image of aTV Flash has the same name. I learned this from experience!
Didn't work (even after erasing & formatting to Mac OS Extended format:
1. Dazzle card reader with Lexar 1GB CompactFlash
2. Imation 128MB flash drive
(I got as far as formatting the drives and connecting them to the Apple TV, but I would get the text scroll and it would freeze before installation was complete)
Good Luck!
