What is the sound quality like on it?
I think it's great.
My Apple TV is hooked up via optical digital, so the SQ has very little to do with the ATV's hardware itself. I've never tried the analog audio RCA outputs, so I can't say.
SQ is dependent on the media. So as with any digital-file playing product, high quality stuff sounds better than lower quality stuff. Everyone's threshold of "ok" on digital music is different. Some say 128k MP3's are fine, others aren't satisfied with anything less than a lossless format. If you have media of bitrate X that you're enjoying on your iPod or iPhone now, it's likely that you will be happy with it on your Axiom system.
However, Axiom speakers are quite revealing, and especially-so when compared to the crummy apple-spec headphones. As you have your Axiom system up and running now, and you have an iPod/iPhone, it's pretty easy to test the quality. Connect your iPod to an input on your receiver with a 3.5mm-to-RCA cord, and play some music. If you're happy with the way that sounds, then you'd be at least as happy with the way an AppleTV would sound.
On the Axiom+AppleTV combo, I can't hear any differences between lossless AAC files and the original CD's. High-quality lossy AAC's and MP3's are fine, though somewhere around 256kbs MP3/AAC, the compression artifacts start to be come distracting. Below that, and my musical enjoyment decreases quickly. I can (barely) tolerate 128kps AAC's, but I'm done with MP3 by about 192kbs.
HD Movie rentals sound great to me, though the SQ is DVD-quality. My gear isn't capable of the new DD-HD or DTS-HD formats, so I don't know what I'm missing.
