I think you need to be hooked to a tv long enough to add your home sharing information at a minimum. I haven't checked to see if the current one can output higher than 48, or if it transcodes on the fly, but I believe I've played higher rez audio through it.
I still have my original atv 160gb just to take on vacations for movies and music, but at this point, streaming to the newer ones is how we end up doing it anyway, because of the netflix advantage.