1. Install to internal HDD; or
2. Install to a USB stick and boot from the usb stick.
From what I read, there was no copying from the USB to the media partition - but I'm not too sure, because I had a hard time following the instructions on the first page for some reason
I know you said you didn't want to open up the ATV, but - if it's just because you're nervous about screwing it up - don't be! I did it yesterday, and once you get the 'ready-to-go' images, it literally is just a copy and paste job. You copy the file to the internal HDD, connect it back up and you're good to go! No mess, no fuss. It really couldn't be easier. More than happy to help you get it working if you go down this route.
I'm also uploading a new 10.5.5 image as we speak which can get you around 110-120MB free on a fresh boot. Might take a while though (couple of days to get up) since I have a crappy upload speed.