Just to get my head around this properly before I make a big screw-up. So if I convert everything that is on my external hard drive using Handbrake I will be able to play it on my tv through my apple tv without any problems and then when I get new media, first convert it again and add it to the folder (ie-series, movies ect) and then the new media will be visible through my apple tv? Basically I want to have all my media I have accessible through my apple tv, iPad ect? And regarding 720p and 1080p content, if I convert these will they be accessible through the apple tv or will I have to watch these files through VLC on my iMac? Sorry for all the questions, just don't want to make a mess of things 
Most media players can handle the format with a dream, like I said I use my movies on both Android and iOS, works with default Windows media player and VLC. My media PC loaded with XBMC on Linux also has no issues.
Note I use AAC and not CoreAudio AAC(OSX support only) for the audio and H.264 for video. I had to update the firmware on my Samsung TV but it now also supports playing the mkv files strait off a USB stick.
What I did to convert my media is to have a second drive, well I actually moved them to the NAS once converted. Will have to get larger drives soon as I almost filled my 2 TB of space.