While it's commonly believed that the AppleTV won't allow a video to loop, it is in fact possible to achieve and requires no hacking.
These instructions were prepared using a test machine running AppleTV firmware 2.0 (unhacked), and a MacBook Pro 15" with iTunes 7.0.3 and OS 15.0.3
1 - Using Keynote, create a presentation consisting of 1 slide for every video you want in the looping sequence; if you only want one video to loop, your presentation will contain 1 slide and if you have, say, 10 music videos you want looped then you would need 10 slides. Your presentation should have pixel dimensions common to video formats (such as 640x480), though 1280x720 is recommended as it is the highest resolution the AppleTV will allow.
2 - Using the Inspector within Keynote, after choosing your pixel dimensions in the "Document" tab, turn on the "Loop slideshow" button. It may also be precautionary to check the "restart show if idle for:" button and set it to half a second, just in case.
3 - Drag your video onto the slide in Keynote on which you want it to appear. Place it where you would like on the slide and resize the video if needed, etc.; then selecting the video choose the QuickTime tab in the Inspector and in the Repeat pulldown menu choose "Loop"--this may not be essential for looping, but it doesn't hurt.
4 - Select the Transitions tab in the Inspector and from the "Start Transition" pulldown menu choose "Automatically."
5 - In the File menu choose "Export..." and select the QuickTime tab, then apply the following settings: --"Playback Uses:" Fixed Timing. You can set the "Slide Duration" and "Build Duration" to whatever you want, but they will affect how much time you have to wait for the video to restart after it ends. The shortest option is 1 second. --"Repeat:" Loop. --"Formats:" can be whichever preset you desire. For the best possible quality on the AppleTV, choose "Custom..." This will open a "Custom QuickTime Settings" window. Set "Video:" here to "Full Size" for it to match the size of your presentation. Then click "Settings..." to pop up the "Standard Video Compression Settings" window, which should be set as follows: --"Compression Type:" H.264 --"Frame Rate:" 24 fps --"Frame Reordering" should be on --"Data Rate" should be capped at 5000kbits/second (or 5Mbits/second), as the AppleTV specs indicate it won't handle a video data rate over 5Mbps
6 - Finish naming/exporting your clip, import it into iTunes, and Sync it to your AppleTV. Because you can expect at least a 1.5 second pause between loops, this method is not ideal for short clips. Also, the pause you entered previously will occur between slides, so if your presentation contains several then each will have a pause before moving on to the next clip.
== New AppleTV Method
With the new Apple TV there is a simpler method for this: First make sure the Repeat Music setting is set in the Audio/Video Setting section
1.create a playlist
2. drop in your videos
3. command select all the video files
4. get info on the selected files
5. change the type to Music Videos
6. On the AppleTV go to Computers > %ComputerName% > Music > Music Videos
7. Play the play list or singular video you want to repeat and away it goes
- NOTE it will keep playing just like music does when you navigate away you will need to play something else (like a movie or trailer or another song) to make it stop.