I've been seriously considering buying an AppleTV to use as a lightweight dev server (PHP/MySQL, svn, and some Rails development) and wanted to confirm a few things before U take the plunge:

1. If I install OS X on it (using the hack described on AppleTVHacks) will I still be able to use its media playing capabilities, or will that be lost?

2. With true OS X installed does the USB port work with external hard drives?

I'd love to hear testimonials from anyone who is using their AppleTV in a similar way to what I'm planning.

Thanks!

I did the OSX hack it's really not worth it to install it due the 256MB RAM in ATV.
THE ATVFILES hack was a lot easier to do.
The ATVFiles is the hack you want to install if all you want to play is other video formats and keep your ATV standard interface. Engadget has great tutorial with all the links on one page to install the ATVFiles hack.
IMO If you want ot check email and webpages use a different machine.
YMMV