JI recommend you try Apple Lossless. Takes a little more room, but room is cheap.
I wouldn't say that Lossless takes a "little more" room; it takes quite a bit more. Uncompressed audio is about 10 MB per minute, so an hour is about 600 MB. If I recall correctly, lossless is about half that, so about 300 MB per hour. If you encode to AAC at 192 kbps, it will take less than 2 MB per minute (about 100 MB/hour) and it is unlikely that you'll notice the difference (you might, but most people wouldn't). "Room" might be cheap, but you should try to figure out how much hard drive space (on your computer and the AppleTV) you want to dedicate to music.
One other thing. If you should decide to get an iPod, you’ll really want to consider how big you want the audio files to be. If you have a flash-based iPod, you’ll fill it up pretty quick with lossless files. If your iPod is HD-based, you won't fill is up as fast, but it greatly reduces your anti-skip buffer. Because this buffer is a fixed amount of RAM, you’ll be able to buffer quite a bit less if you use uncompressed or lossless. I’ve experienced skipping on AIFF (uncompressed) files with my HD-based iPod in the car.
I’m not saying you shouldn’t use lossless, but you should do some thinking ahead of time about how big you want those files to be.