What is Watchdog
Watchdog reboots the Apple TV it if the GUI isn't running.
How to disable Watchdog
Apparently BackRow.framework tells Watchdog that "we are up and running":
strings /System/Library/PrivateFrameworks/BackRow.framework/Versions/A/BackRow (...) BRSettingsHelper tellWatchdogWeAreUpAndRunning
SettingsHelper has a reference to "/sbin/shutdown -r now" Symlinking /sbin/shutdown to /usr/bin/true makes the shutdown command do nothing
This Apple document about Watchdog may shed some light:
http://docs.info.apple.com/article.html?artnum=106588&coll=cp (However, on the Apple TV, there is no /etc/watchdog.conf, other than what this document is saying)
Watchdog is not used in Mac OS X 10.4: look at launchd.