i know lots of people who have converted their existing movie collection (dvd, bluray, etc) to appletv format and storing it there. some even went so far as to sell the dvds and use this to fund their never ending collection.

appletv and ipods use the same format mp4. if i understand correctly and depending on what tools/presets you used stuff formatted for appletv will work on ipods by default but not necessarily the other way around depending on what resolution was used to format them.

there are TONS of tools that you can use to rip/format. IMO handbrake is the bees knees