If you haven’t updated your Apple TV to iOS 4.3 yet, don’t. There seems to be a growing number of people having issues with “flickering” and high-def TVs. It doesn’t seem to matter which type of TV you have as every brand is having issues.
There is a flicker(screen flash?) at random intervals of about once per second for a few tenths of a second. And every 10-15 seconds (random), there is a complete video dropout for about a second or two. The audio is OK during all of this. It seems to affect every type of video including both menus and movies, including Netflix and home sharing.
Now, it would appear that the users that are having problems have older TVs that they are trying to run 1080i. Apple TV does not support 1080i but most TVs will take a 720p resolution and convert it to 1080i. This conversion worked for users up until the 4.2 update that Apple released on Wednesday. The update is also restricting users from changing the HDMI output resolution. Users are reporting that the selection is limited to Auto and the output is set at a standard definition 480p.
Hopefully Apple will have a fix soon. Check back for updates.