I have had a series of issues since upgrading to 1.1. I could not get Patchstick to work but I was able to loan a drive manually and enable SSH access on my Apple TV.

1) Watchdog does not seem deactivated though because my machine keeps rebooting. Do I need to do something different in 1.1 to deactivate Watchdog?

2) I installed ATV Loader (V1.08) but I have two issues with it. For one, while I got the Awkward TV application to show up, I lost YouTube in the process. More significantly, I get an error every time I try to download an plugin (tried most of the list, error is "Failed to copy the new file ERROR=-48")

i found also no way

download and copy via fungu and mv to /System/Library/CoreServices/Finder.app/Contents/Plugins
then kill finder and it should work

So how do I deal with the rebooting?

Well if you dont kill finder it wont reboot
If you kill it than only for a short time.
If you want to use a application like firefox or vlc use Applikation Menue to start in front of the finder.